Australian Banks Lift Bad Debt Estimates

123jump.com Staff
18 Dec, 2008
New York City

Leading Australian banks caution shareholders of rising bad debt expenses in 2009. Slowing economy and weak job market are expected to increase bad debt expenses at Commonwealth Bank to 60 basis points from 40. ANZ also cautioned of rising expenses.

[R]3:00AM New York, 7:00PM Sydney - NAB and ANZ warns of rising bad debt expenses in the next year. China based Wuhan Iron & Steel pays $180 million for half of Centrex Metals projects.[/R]

In Sydney trading ASX 200 index rose 0.3% or 10.6 to 3,581.20.

Of the ASX 200 index stocks, 102 rose, 83 declined, and 15 were unchanged. Macquarie DDR Trust led gainers in the index shares with a rise of 28.6%.

NAB and ANZ Warns of Bad Debts Next Year

National Australia Bank (NAB) and the ANZ cautioned today that bad debts may rise next year as the global economic conditions worsen.

Incumbent CEO John Stewart warned shareholders that conditions for all banks will be more difficult next year.

“In over 30 years in this business, I have not known such a time of economic and market uncertainty. For the year to date, the fairest update I can give you is that overall our group results are acceptable so far, but we anticipate that it is going to get more difficult for all banks as the economy slows,” said Stewart.

Similarly, ANZ chairman Charles Goode told shareholders that Australia may face recession conditions that may increase bad debts for banks. Goode however noted that the worst of the global financial crisis might have passed.

CBA Forecasts Higher Impairment Expense

Commonwealth Bank of Australia today said its forecast impairment expense of A$2.5 billion, or 60 basis points of estimated average gross loans from an earlier estimate of 40 to 50 basis points or A$1.7 billion to A$2.1 billion.

CBA''s communication lapses with the market on the eve of its capital raising program forced the lender to cancel A$1.6 billion institutional placement through Merrill Lynch and issue another placement with UBS at a discount.

Gainers & Losers

Macquarie DDR Trust led advancers in the ASX 200 index shares with a rise of 28.6% followed by increases in Transpacific Industries of 26.7%, in Energy World Corp. of 26.3%, in Macquarie Countrywide of 20.5%, and Macquarie Office of 20%.

Emeco Holdings Ltd. led decliners in the ASX 200 index shares with a fall of 16.9% followed by losses in Centro Retail Group of 14.9%, in NRW Holdings of 12.5%, in Futuris Corp. of 11.8%, and Great Southern Ltd. of 11.1%.

Financial stocks also slid after NAB and CBA warned of rising bad debts next year. CBA fell 9.1% and Babcock & Brown plunged 6.3%.

Wuhan Iron to pay $180 million for Iron Ore Mine]

Centrex Metals reported today that China''s fourth largest steelmaker Wuhan Iron & Steel will pay $180 million for half a share in Centrex Metal''s iron ore projects in South Australia.

Wuhan Iron & Steel will initially pay $59.5 million in cash after the deal is approved, followed by another $30 million payment a year later.

Wuhan will pay additional $90 million in four tranches after the joint venture iron ore production reaches to 2 billion tons. The remaining $9.5 million will be for a direct 15% stake in Centrex.