×

ANZ Lifts Bad Debt Charges as Credit Crunch Bites

Australia and New Zealand Banking Group said on Monday it expected much higher bad debt provisions in the first-half of fiscal 2008, reflecting difficult conditions facing Australian firms amid the global credit crunch.

ANZ, Australia's third-biggest lender, said in a trading update that provisions would be about A$975 million (US$894 million), a 72 percent increase from a year ago and more than the A$567 million in the 2007 full year.

The surprise announcement comes less than three weeks ahead of its first-half earnings on April 23, and could serve as a timely reminder to investors about the risks facing the Australian banks.

"As turmoil in global markets and the slowing of the US economy plays out and the Australian economy slows due to tighter monetary policy and credit conditions, there are likely to be flow-on effects for the commercial portfolios," ANZ's Chief Executive Mike Smith said in a statement.

"There is a change taking place in the credit cycle and we intend to continue to take a conservative approach in reviewing our provisioning requirements," he added.

ANZ's comments pushed down the banking sector shares. National Australia Bank, the top lender by assets, slipped 3.5 percent to A$30.00 and Commonweath Bank of Australia, the second-biggest, dropped 2.6 percent to A$44.30. ANZ shares were on a trading halt.

ANZ added that revenue growth was expected to be around 11 percent in the first-half over the same period a year earlier.

ANZ is one of the secured lenders to collapsed stock broker Opes Prime Stockbroking, and the bank is in the process of selling shares held as collateral to recoup a A$616 million loan made to Opes.

Australian banks have been forced to increase their provisions for bad debts.

Several highly-geared Australian companies including ABC Learning Centres, Centro Properties Group, and Allco Finance Group have had trouble in refinancing their loans due to the global credit crisis.