ANZ Banking Group is expecting its profit growth to be sapped by extra loan provisions and the global credit crunch.
Australia’s third-biggest bank by market capitalisation has revealed yesterday that it has put aside an extra $361 million to pay off potential bad debts should they sour.
The biggest of those provisions is a $220 million derivatives position with US monoline insurer ACA Capital.
Latest data from UBS estimates Australia has around $20 billion of various types of bonds and other investments insured locally through monoline insurers. It forecasts that 55 per cent is for assets owned by listed entities in Australia.
Aside from those provisions ANZ said that profit growth would beat the 11.5 per gain to $4.18 billion it achieved 2007 even though its businesses were being hit by higher credit costs.
“In the first four months of trading, good performances form personal and Asia, a turnaround in institutional and solid results from New Zealand have been overshadowed by higher credit costs on commercial lending,” ANZ chief executive Mike Smith said.
“This is a financial services bloodbath and I think that the Australian banking system is in remarkably good shape in comparison . to any other western market.
“We are progressing well but as previously warned we have not been immune from global market issues, including uncertainty around funding costs.”
However, the current turmoil is giving the bank long-term business opportunities, Smith said.
ANZ’s shares fell $1.45 or 6.06 per cent to $22.46 yesterday.
The bank delivers its interim results on April 23.
