Australia and New Zealand Banking Group today flagged higher bad debt charges of over A$900m (US$677m) for the first-half of 2016 due to a deep downturn in Australia’s resources sector, sending its shares lower.
Most analysts expect the spike in soured debt to be specific to ANZ, but some say a prolonged weakness in commodity prices could hurt major banks after years of record profit, strong dividends and improving asset quality.
Just last month, the bank forecast bad-debt charges of A$800m. Exposure to resources, including oil & gas and mining, accounted for 2.2% of ANZ’s total book of A$898bn at the end of September.
“This ANZ release suggests that the deterioration they have seen is likely to have implications for the banking sector,” Macquarie analyst Victor German said in a note.
Investors took the news badly, driving ANZ shares down 5.5%. The other major banks were from 2% and 3% lower, underperforming a 1.1% fall in the wider market.
Morgan Stanley analyst Richard Wiles forecast major bank impairment charges to increase to 28bp of total loans as of fiscal year 2017 from 16bp in 2015, implying an “earnings headwind” of about 4% per annum during the next two years.
Westpac head of commercial and business banking David Lindberg told investors today that stressed assets in his division were well managed and that the bank was not seeing “major cracks”.
Westpac, however, was seeing signs of stress in its consumer loan book, Lindberg said.
ANZ announces results for the six months ending March 31 on May 3.
Additional reporting by Ian Chua