ONE sixth of Western Australian farmers are planning to shift some or all of their business from their main bank over the next 12 months, a new study has found.
Research by Insight Marketing & Management also found that 30 per cent of farmers already used two banks.
More than 250 farmers throughout the broadacre agricultural areas of WA participated in the survey.
Insight director Ray Wilson said a distinctive feature of WA’s rural banking market, worth about $3 billion, was the relatively low concentration.
Ten banks compete in the farm finance market, and the top three banks have a 58 per cent market share.
Mr Wilson said this contrasted with other rural services, such as chemicals, fertiliser and wool, which are dominated by Wesfarmers Landmark and Elders.
The market leaders in rural finance are believed to include Westpac, National Australia Bank, BankWest and the Commonwealth Bank.
Rabobank, which until this month traded in the rural finance market through its wholly owned subsidiary Primary Industry Bank of Australia, claims a 15 per cent market share.
This change will align its rural finance brand with its corporate agribusiness brand.
Rabobank is becoming a more potent threat to the big banks, with the opening of five branches around WA and plans to add transactional accounts to its product range.
Among the major banks, ANZ is considered the smallest player in rural finance.
However it is making a concerted effort to lift its performance, with the establishment of specialist agribusiness units and the launch of new products (such as a graingrowers advance and an agribusiness revolving credit line) to bring it up to speed with the market leaders.
Further competition comes from specialist rural lenders such as Elders Rural Bank, Wesfarmers Landmark and Bendigo Community Bank, as well as Adelaide Bank.
AWB and CBH (through its subsidiary AgraCorp) offer specialist forms of harvest finance for grain growers.
Farm machinery vendors also provide competition for the banks, through the provision of equipment finance packages.
Insight found that 25 per cent of farmers had been approach by another bank in the 12 months prior to the survey, while 19 per cent of farmers had been actively seeking information from other banks.
When asked to nominate the bank they would switch to, the preferred alternatives were the four specialist rural financiers (Rabobank, Elders, Wesfarmers and Bendigo).
These financiers received 68 per cent
of the preferred bank choice, which was three times their current market share.
Paul Hansen, a rural consultant with accounting firm RSM Bird Cameron, has also found that farmers are switching from the big banks to rural specialists.
He said farmers who switched were making a conscious decision to pay more in return for superior service.
Mr Wilson said there were three main reasons for choosing a particular bank: a good overall reputation in rural finance; an understanding of agriculture among their staff; and a willingness to support clients in difficult times.
He added that farmers had a high expectation for quality service and strong one-to-one personal relationships with all of their service providers.
Of nine key rural services surveyed by Insight, banking had the highest overall incidence of ‘poor’ personal relationships, averaging 10 per cent.
For one of the major banks, the incidence of ‘poor’ relationships was 24 per cent. Not surprisingly, this bank had a low ratio of loyal clients and consequently a high proportion of clients (26 per cent) intended to switch some or all of their banking.
Insight also found that shareholding was an important factor in customer loyalty at various service providers, including Bendigo Community Bank (each branch is half-owned by Bendigo Bank and the local community) and Wesfarmers Landmark (wholly owned by Wesfarmers).
BankWest chief manager WA country Jim Watson said he retained a very positive view despite the drought that had adversely affected parts of WA.
Mr Watson said he was confident most WA farmers would be able to finance this year’s crop with little stress.
As a rule of thumb, he said, banks (and farmers) should assume that one season in five would be poor when they assessed ability to repay loans. Most farmers who had experienced a bad season in 2001-02 would be helped by the equity they had built up in their farm business and their long-run track record of viability.
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