Wry & Dry

ANZ's bad-debt announcement no surprise, really

It's been a bad year for the banks.  And their customers.  And their shareholders.  Not that W&D is shedding a tear.  As readers would well expect.

And this morning the bad news kept on coming.  In the form of a bit of reality: ANZ announced that its bad-debt costs would rise by at least $100m more than the $800m it forecast in February.  This is because of 'local and international resources exposure'.

The share-market responded with grumpiness akin to that of Senate cross-benchers (see more, below).  And belted ANZ's share-price by 5.5%.

So, W&D asks, the collapse in commodity prices over the past two years up until yesterday was, well, business as usual for ANZ?

In fairness, these things do take a while to work their way through the bureaucracy of a bank.  So, W&D also asks, how much more to come is there?  Not only from ANZ but other banks.

And not only about resources' exposure, but W&D has heard mumbles from across the Tasman - the New Ziland agricultural sector is not in good shape and the banks are big lenders there.

W&D likes numbers.  So consider one broker's (Morgan Stanley) note: In 2015 the banks had a bed debt charge of 0.16% (historically low).  Over the next two years that is forecast to increase to 0.28%.  Not much, W&D hears some readers say.  No, all other things being equal, only a 4% p.a. cut in net profit.  

In 2009, the CBA booked a bad-debt charge of 0.55%.  And cut its dividend by 25%.  Go figure.