National Australia Bank's BNZ has became the first New Zealand bank to announce significant provisions for bad dairy loans as the prospect of a third year of loss-making milk payouts approaches.BNZ reported it had re-categorised NZ$579 million or 6.8 per cent of its dairy loan book as impaired in the first half of the financial year, saying it was taking a conservative approach to provisioning in case payouts remained unprofitable for another two to three years. Most other banks expect dairy prices to return to profitable levels some time in 2017.The impairments increased BNZ's collective provisions for bad dairy debts by NZ$54 million to NZ$147 million for the half year, which in turn was the major contributor to BNZ Banking Group's cash earnings falling by NZ$51 million or 10.2 per cent from the same half a year ago to NZ$451 million.BNZ chief executive Anthony Healy told Banking Day in an interview the decision to take a very conservative approach was partly linked to BNZ's early adoption of the International Accounting Standards Board's IFRS 9 standard. "We took a view of a lower-for-longer scenario and reviewed our dairy book file by file and re-rated it based on a scenario where you don't get back to a [break-even] NZ$5.50 to NZ$6.00 per kilo payout until 2019," Healy said.The main Fonterra forecast for the current 2015/16 season is currently at NZ$3.90 per kilo and is not expected by most economists to rise above the NZ$5.30 per kilo level seen as break-even for most farmers until well into next year. "I'm hoping that's overly conservative, but as a bank we wanted to be well provisioned, and because we're on IFRS 9 that accelerates the collective provisioning that you get," he said."We don't have a lot of specific provisions because we don't have a lot of defaults in the book, but what we do have is a number of clients under stress and we're supporting them through, but it was prudent to put in place collective provisioning to cover the period between now and FY 2019 of a lower-for-longer dairy price."The other two banks to report their first half results, ANZ and Westpac, have reported more modest provisions for dairy lending and have yet to adopt IFRS 9, which is not compulsory until 2018.Elsewhere, BNZ reported that its decision to return to the market for mortgage brokers a year ago was beginning to pay off with its share of the fast-growing Auckland picking up after a long period of slow decline or stagnation."It's really paying off for us and we're seeing growth in housing share, particularly in Auckland where a lot of the activity is," Healy said, pointing to a six basis point increase in share in Auckland since December.BNZ announced a partnership with mortgage broker network New Zealand Financial Services Group in April last year and has also increased its own mobile mortgage manager sales force in Auckland. BNZ's mortgage book in Auckland rose 12.9 per cent to NZ$14 billion in the year to