New Zealand's finance minister Bill English says the country's major banks - Australia's big four - are expecting a tick-up in bad loans this year as low milk prices pressure the dairy sector, but they don't think this will impact on profits and remain supportive of NZ agriculture. 
The Reserve Bank of New Zealand cut interest rates last Thursday, to head off slowing growth amid weak dairy prices and softer construction activity.
In an interview with Fairfax Media after the cut, Mr English said the big banks are passing it on to customers with variable mortgages, but pointed to the big swing into fixed rate loans over the past 12 months. About 60 per cent of mortgages in New Zealand are on two-year fixed rates, contrasting with Australia where most mortgages remain on variable rates despite historic low interest rates.
The RBNZ cut will relieve pressure on struggling dairy farmers, and while he still expects many farms to make losses this year, Mr English said most have strong balance sheets due to big increases in equity over the last decade.
"There will be a bit of rescheduling of debt going on," he said. "We have been pleased to see . . . from the banks that they have a sound long-term view about the agricultural and dairy sector and they are willing, in general, to supply the working capital needed to maintain production and efficiency.
"The banks are being positive and their capital has been strengthened in a way that they have plenty of capacity to actually do it."
The Australian banks made between 10 per cent (CBA) and 22 per cent (ANZ) of their 2014 cash earnings in New Zealand, according to Credit Suisse.
Overall return on assets was higher in New Zealand than in Australia, but growth was softer and bad debt charges, while very low, were rising, Credit Suisse said.
Mr English, who is also the Deputy Prime Minster, said discussions with each of the major banks over the past month revealed "they are expecting some tick-up in their non-performing loans but are not expecting much impact on profitability. They are able to handle it".
The banks "have done a pretty thorough job, encouraged by the Reserve Bank, of isolating the parts of their books which are likely to be overextended, and there will be some. They will tend to be larger operators or new entrants carrying very large debt loads".
The RBNZ has said that about 30 per cent of dairy farm debt is held by the most indebted 10 per cent of farms. Mr English said even if banks foreclosed on farms, there would be little backlash fromNew Zealanders if the farms had overextended themselves.