The banking sector tanked again today after ANZ came out with another unexpected operating update warning that bad debt provisions would hit $974 million in the latest half, dwarfing the $567 million hit taken for the whole of the previous year.
The big news was an additional $350 million collective provision which sent ANZ shares tumbling more than 5% as almost $10 billion was wiped from the value of our Big Five banks.
And it looks like the Tricom and Opes Prime exposures have already triggered a bad debt provision based on the following statement:
Collective provisions for the half year have been further increased and will include around $350 million for risks inherent in the current Institutional portfolio reflecting a small number of downgrades in selected commercial property and broking industry segments, stronger portfolio growth in Institutional (20% growth since 30 September 2007) and an allowance for secondary impacts of the market turmoil generally.
CEO Mike Smith and finance director Peter Marriott held a 35 minute conference call this morning which was slightly constrained by the fact that the formal results on April 23 are less than three weeks away.
Banking analysts from UBS, Morgan Stanley, Merrill Lynch, Macquarie and Deutsche Bank all asked questions but it was only Matthew Davidson from Merrills who touched on the Opes Prime collapse.
Merrills, of course, has largely finished liquidating its $500 million share portfolio previously owned by Opes clients but Davidson very gently enquired as to whether Smith expected any small business clients would shun the bank.
“No, I don’t,” the formal Englishman replied rather dismissively, before dropping out that senior ANZ executive Peter Hobson is doing a formal review of the bank’s exposures to the securities lending business.
Given that Opes has triggered ANZ’s greatest PR shellacking since it teetered close to collapse in 1992, the bank was clearly expecting far more questions on Opes from the analyst community.
Alas, it was investors relations boss Stephen Higgins who asked his boss an Opes Dorothy Dixer after the formal questions had been finished and Mike Smith’s response can be summarised as follows:
Can’t say much because it is all before the courts but we’d still be backing Opes but for the “irregularities”. The review of securities lending will be finished “fairly soon”. The bank is acting in a “measured and careful way” and is working closely with a range of regulators on what are very complex issues. It’s tough for everyone. There are no winners when irregularities happens, but we are mindful of the impact of all this on our reputation.
In other words, Opes CEO Laurie Emini is getting the blame for everything.
The spin here was quite bizarre because ANZ belatedly dropped this comprehensive disclosure about its vast number of newly inherited substantial shareholdings at 10.55am, midway through the conference call. Yet there was no reference to it before.
Even after liquidating about $300 million worth of shares – the exact details of which remain secret – ANZ has now disclosed it owns more than 5% of a staggering 94 different securities.
This mess gets bigger by the day and ANZ is looking grubbier with each revelation as it even sells Olympic legend and Fortescue Metals chairman Herb Elliott out of his $40 million shareholding.
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