_______________________________ Yulgilbar Field Day Lending to Australian Agriculture

1. _______________________________ Yulgilbar Field Day Lending to Australian Agriculture Financing the Farm & The Outlook Geoff Rose Head of Agribusiness NSW/ACT 1st August 2014

2. Financing Australian Agriculture ____________________________________________________________________________ • Today we will cover three topics: • 1. What does a Lender look for? Agribusiness lending • 2. Lending to Agriculture: What does the Outlook look like? • 3. Current economic trends & the Beef Industry. Note: Each red dot represents a NAB Agribusiness Banking Centre (>600 nab agribusiness bankers and 110 locations !)

3. Five “C’s” of Financing The Farm ____________________________________________________________________________ Character The Five Cs Collateral Capital Capability Cashflow

4. Lending – It’s not just about Ratios ……. ____________________________________________________________________________ Cashflow, Leverage /Equity, Interest Coverage & Balance Sheet Strength • Financial Analysis • Equity Levels (Surplus Assets level / trends) • Interest coverage (>1.5-2.0x) • Cost to income (65-70%) • Cash position (net cash surplus) • Debtors & Creditors • Trend and key driver analysis • Facility Agreement and Structure • Undertakings • Negative pledge • Material Adverse Change Clause • Dividend Restrictions • Equity participation - ring fencing of project finance • Related party arrangements (e.g. Director’s loans) • Concentration Risk & Funding Mix • Reporting & Governance • Financial Reporting • Frequency (quarterly) • Quality (P&L, BS, CF) • Board / Senior Management & Key Person Structures • Compliance obligations - statutory payments • Risk Management Document • Security • ‘Primary’ Security = cash flow to met repay • ‘Secondary’ (security 1st RM deeds / fixed & floating charge) • Guarantees (Full Recourse & All Monies) • Loan to Valuation Ratio (LVR – key focus here)

5. Agricultural Lending – Growth Since 94’ ____________________________________________________________________________ Since 94’ 3 distinct periods of growth in lending to agriculture. Dec 08’ & Sep 11’ Average Annual Growth Rate = 3.7% June 02’ to Dec 08’ Average Annual Growth Rate = 12.4% Sep 94’ to June 02’ Average Annual Growth Rate = 8.8%

6. Agricultural Lending – composition by % ____________________________________________________________________________

7. US Unemployment • Unemployment rate dropped to 6.1% from 6.3% with an unchanged participation rate • It also shows that a cumulative 1,385,000 jobs have been created in the first 6 months of this year. Annualising this (by simply doubling it) would give a 2,770k annual pace. If sustained, his would be the highest annual total since 1999, greater than the 2,506k in 2005 or the 2,085k at the height of the boom in 2006.

8. If the US stops printing money, what happens? • The US Fed have been pumping money into the economy since 2008. There have been 3 rounds of QE, with the latest (QE3) commencing in September 2012. • The US Fed started tapering QE in late 2013 and therefore a slowdown in Bond purchases. If the US continues to withdraw stimulus, term interest rates will likely rise around the world.

9. ChinaThe economy has clearly slowed – shifting to a new normal?

10. China a longer term positive story and Australia’s links to China increasingly dominant.

11. For Australia, main game Asia: about 75% of Australia’s exports

12. Exposures by Industry NAB Agribusiness Q1 FY 14’

13. Forecasts

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15. ________________________________________________________________________________________________________________________________________________________ Looking forward to any Questions you may have Thank you