BACK in the year 2000 when SA was on the brink of what would turn out to be its worst drought in recorded history, a new bank dedicated to agribusiness was launched – Rural Bank.
With the backing of shareholders Elders and the Bendigo Bank, its licence was granted specifically to address the withdrawal in rural and regional presence by major banks.
In the subsequent 13 years, Rural Bank has grown to enjoy a market share of more than 6 per cent of the entire Australian agricultural debt market.
"Part of the reason we've been successful is the partner model we run," Rural Bank's chief executive officer Paul Hutchinson said.
"We work very closely with the Elders group, who manage livestock, real estate, farm supplies and agronomy, and they create a proximity to customers that a general purpose bank would not be able to achieve.
"Through our network we are able to pair customers with an agribusiness specialist in their area and with expertise in their specific sector of primary production.
"And by teaming up with those agribusiness specialists, it means we're right on the ground in terms of serving the operating cycle and capital investment needs of those customers."
Rural Bank also works closely with Bendigo Bank to provide agribusiness solutions to customers who "interface with the community banking model".
"We've got two discrete platforms, or retail propositions," Mr Hutchinson said.
"Both are quite different and both are major reasons we've been able to increase the Rural Bank franchise."
Mr Hutchinson said the strength of Rural Bank's growth during a difficult period for South-East Australia as a result of drought illustrates the bank's broad reach across the country.
It is a product of diversification, with the bank operating in different sub-segments and geographies to recognise the "vagaries of the climate and commodities that Australian agriculture is all about".
"For example, the pronounced drought in the southern regions of Australia was offset by other markets, particularly in WA and Qld, where the sector was growing quite well, he said.
More recently the effects of the global financial crisis and other state-of-the-economy issues have had a negative impact on agribusiness.
The banking system's annual growth of 10pc to 13pc in its first decade has moderated to about 5pc annually, mostly because of a moderation in land acquisitions in the past few decades.
"On the other hand, however, there has been a big uptake in the renewal of machinery, particularly in SA," Mr Hutchinson said.
"Seasonal conditions here in SA are quite good and there seems to be a bit more real estate activity occurring."
Mr Hutchinson says the bank remains very confident about growth potential.
"As the terms of trade with other export countries inevitably improve, Australia has the opportunity to capitalise on a number of things," he said.
"One is the growing global population, particularly the middle class population of Asia, and the fact that we've got a very high quality food bowl."
*Full report in Stock Journal, November 7 issue, 2013.
