The Goode, the bad and the hopeful
The Age
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 warns that tougher liquidity requirements could drain dividend payments.Departing ANZ chairman Charles Goode said setting money aside to cover bad loans had been a strain, with provisions increasing from $2 billion to $3 billion."However, we believe the worst is behind us in providing for doubtful debts," he told the annual meeting in Melbourne yesterday.Mr Goode said the provision for doubtful debts should fall in the next two years, but he was still pessimistic about global economic growth."The recovery in the world economy is likely to be slow," he said. "It is facing deleveraging by business and consumers, higher capital requirements for banks, higher interest rates and higher taxes."Mr Goode also ruled out the prospect of a share buyback given tough new regulations, particularly on liquidity, and said the rules 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," he said.Chief executive Michael Smith said the bank would look at tapping the residential mortgage-backed securities (RMBS) market."All alternative forms of funding and different mechanism need to be looked at right now," he said."I think it's quite good that we're seeing the reopening of these markets €” it basically shows confidence is returning and normality is coming back to credit markets."Westpac issued $2 billion of RMBS this week.Mr Smith also said there had been a slight increase in credit card use leading up to Christmas, but he believed consumers' appetite for debt was tempered by the potential for more interest rate rises.ANZ shareholders voted to re-elect John Morschel, who will take over as chairman next year, and elected Singapore-based Lee Hsien Yangto the board.ANZ's mortgage lending increased 10 per cent to $141 billion in the year ending September 2009, while commercial lending was flat and institutional lending declined by 20 per cent to $49 billion.
© 2009 The Age
