Banking royal commission: NAB charged 18pc interest as farming family battled drought

NAB let a cattle family remain on two outback stations only because it knew it wouldn’t be able to sell them during drought.

NAB general manager of strategic business Ross McNaughton leaves the royal commission. Picture: David Geraghty.

NAB let a struggling cattle family remain on two outback stations for five years only because it knew it wouldn’t be able to sell the properties in the middle of a drought.

But it used the five years since Ken and Debbie Smith stopped making adequate payments on their $3.2 million loan because of drought and low cattle prices to impose default interest rates of up to 18 per cent, mushrooming their debt to nearly $7m.

NAB general manager of strategic business Ross McNaughton said the bank had left the Smiths on their farms, Limbri station and Oakdale, in outback Queensland, because NAB managers believed the situation could be resolved given time and rain.

But counsel assisting the financial services royal commission Mark Costello produced a NAB email from November 2014 showing the bank was considering evicting the Smiths and bringing in receivers.

At the time all livestock had been removed from Limbri station, south of Hughenden, to the slightly better Oakdale, cattle were dying and photos — taken secretly by a local real estate agent for NAB — showed remaining animals emaciated.

Cattle prices had hit rock bottom, partly because of the live cattle export ban, but as Ms Smith told the commission yesterday, they were trying to feed cattle enough hay to get them strong enough to be trucked to the Townsville Meatworks or Roma saleyards to keep paying money to NAB.

The email advised that the option of farm sales and enforcement against the Smiths was not advised because of “drought and the current political climate”.

“I’d like to get (receivers) KordaMentha involved but this might not be politically acceptable,” the internal NAB email said. Instead, the bank’s impaired loan department was advised to move against the family three months after the first good rains.

Mr Costello asked Mr McNaughton if NAB had decided to leave the Smiths in place, with accumulating high default interest rates, out of self-interest. “We still wanted to resolve this position with the Smiths,” Mr McNaughton said.

Mr Costello suggested the most compassionate way NAB could have helped the Smiths would have been not to apply hefty default interest rates to their overdrawn account.

SUE NEALES

BUSINESS P28