Australia’s Big Banks Have Emerged From Crisis In Good Shape

Post by Sharat on January 15, 2010 · Under Australian Economy, Business News, Company News, banking · Comment 

According to a new report by credit rating agency Fitch, the Big Four Australian banks have emerged from the global financial crisis strong and robust, but continue to face challenges in the form of asset quality.

The ratings agency says it believes that credit quality may be tested further as the effect of fiscal stimulus ends and interest rates rise.

Fitch says it is confident the big Australian lenders will be able to withstand additional credit impairment, largely as a result of robust trading profits, and relatively low levels of bad debt.

“Pre-impairment operating profit has continued to rise, which, when combined with loan-loss reserves, offers a substantial capacity to absorb further impairments before impacting capital,” Fitch said in a statement today.

Mike Smith, chief executive of ANZ during the lenders annual general meeting told shareholders he thought the bad debt cycle had peaked already. ANZ recorded nearly $3 billion in credit impairment charges during the year ending September 30th 2009.

Despite the large rise in credit impairment charges, ANZ still posted net profits of $2.94 billion during the year, an 11 per cent decline compared to the previous year.

Cameron Clyne, chief executive of NAB declines to agree however, after reporting a 42 per cent drop in the lenders net profit of $2.59 billion in October last year.

Mr. Clyne says he believes that the bad debt cycle was yet to peak.

Fitch also said it expected the banks to be more conservative with their funding mixes and maturities, due to the potential of more onerous regulatory capital and liquidity requirements.

The ratings agency has a stable outlook on Commonwealth Bank, ANZ, NAB and Westpac.

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