Big four banks play vital role for ag

The big four banks are huge companies, and very profitable. A look at the top 10 list on the Australian Stock Exchange will find the Commonwealth Bank of Australia listed as the country's biggest company.

Westpac, ANZ and NAB are all in the top 10 - a big part of the Australian business landscape in anyone's language.

Those who are not customers of a big four bank are still likely to have exposure through direct shares, and almost certainly through superannuation.

I would venture to suggest that the vast majority of adults in Australia are touched by a big four bank in some way.

Australian agribusinesses are highly dependent on bank funding, with more than 90 per cent of agri-finance coming from banks.

On this measure alone, we need profitable, strong banks. The Australian economy generally needs a robust banking sector.

I have heard some people say how much they miss institutions such as the Commonwealth Development Bank. This bank met its demise when CBA was privatised in 1991.

I remember the old Development Bank quite well. It loomed large in agriculture for more than 30 years, and by some estimations, assisted with 400,000 loans.

Development Bank loans were for projects that were transformational for the agribusinesses concerned, but perhaps may not have fitted within the parameters for being funded by a traditional bank.

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It is unlikely the government would be involved in another Development Bank type of arrangement, but maybe there are other untapped sources of funding outside the big banks such as superannuation and second tier lenders.

The four big banks are huge behemoths that have a business model that is pretty much untouchable. They have a privileged position in Australian society. They not only have a banking licence, but also a social licence.

In most part, the agri-bankers I deal with are doing their level best to meet the needs of their customers. They do this with ever dwindling resources and increasing expectations on them. I am in no way an apologist for banks. I do feel for agri-bankers, as the vast majority of ones with I deal with are good, honest, hardworking people.

The overall direction of banks is set in Melbourne or Sydney, and certainly not in regional SA. This becomes quite evident when the inevitable branch closures happen.

I am sure the numbers stack up from the bean counters' perspective in Melbourne's Collins Street, but some of the decisions seem quite nonsensical to me.

Banking in the agricultural industry has always been, and will always be, based on relationships.

Farmers by nature are very loyal - you see this most with how often they change banks and even more so in accounting.

My understanding is the loan default rate in family run agribusiness is negligible, and banks like lending to the sector.

The balance needs to be maintained between profitability of the banks and extracting a good deal for the agribusiness owner.

Safe in the knowledge banks are doing quite well financially, feel free to put your best foot forward and extract a fantastic finance package for your business.