Bank reforms to hit dividends: Goode
Sydney Morning Herald
Saturday December 19, 2009
ANZ is confident it can start reducing provisions for bad debt now the worst of the economic cycle has passed, but warned tougher liquidity requirements set to be introduced by the banking authorities could drain future dividend payments.The departing ANZ chairman, Charles Goode, said setting money aside to cover bad loans was a strain on the bank last year, with provisions increasing from $2 billion to $3 billion."However, we believe the worst is behind us in providing for doubtful debts," Mr Goode told shareholders at the general meeting in Melbourne yesterday.The provision for doubtful debts should fall over the next two years but he was pessimistic about global economic growth."The recovery in the world economy is likely to be slow. It is facing de-leveraging by business and consumers, higher capital requirements for banks, higher interest rates, and higher taxes."Mr Goode ruled out the prospect of a share buyback, given tough new regulations, especially around liquidity rules, and said the reforms were also likely to reduce dividends. "If regulations require banks to carry more cash ... it will be hard to get returns on equity like before."Mike Smith, the chief executive, said the bank would look at tapping the residential mortgage-backed securities market to help support the bank's financing needs."All alternative forms of funding and different mechanisms need to be looked at right now ... It's quite good that we're seeing the re-opening of these markets - it basically shows confidence is returning and normality is coming back to credit markets."Westpac issued $2 billion of such securities earlier this week.Mr Smith said there had been a slight increase in credit card usage before Christmas, but believed consumers' appetite for debt was tempered by the potential of more interest rate rises.Shareholders re-elected John Morschel to the board, who will take over as chairman next year, and elected Singapore-based Lee Hsien Yang as a director.
© 2009 Sydney Morning Herald
