Global credit woes hit ANZ

ANZ Banking Group is significantly boosting the amount of cash it is setting aside to cover bad debt as mounting losses from the global liquidity crisis eat into company profits.

The bank, which operates the ANZ and National Bank brands in New Zealand, said it was providing A$375 million in collective provisions, A$850 million in individual provisions and a A$160 million write-down on the value of "US credit intermediation trades".

The announcement from the ANZ – which followed a brief trading halt - follows Friday's A$830 million provision by BNZ's owner National Australia Bank.

ANZ said that because of the provisions its cash earnings per share were going to be down by between 20 percent and 25 percent this year.

Its underlying business was continuing to deliver solid results with profit before provisions expected to be up about 8 percent and cash profits to be over A$3 billion.

Conditions in New Zealand were deteriorating, however, and growth in provisions on this side of the Tasman were expected to see profitability here fall by about 10 percent.

"As the deterioration in global credit markets continues and the slowing of the global economy plays out in Australia and in New Zealand, there are flow-on effects for our commercial portfolios and to a lesser extent the personal portfolios," chief executive Mike Smith said in a statement.

"It is prudent in this difficult environment to continue to take a more conservative approach and further strengthen our balance sheet by increasing our collective provision to a peer-leading level of above 1 percent of credit risk weighted assets," Mr Smith said.

The bank is also strengthening its underwriting standards, investing in collections operations and working to reinvigorate its risk management culture, Mr Smith said.

Shares in the group have fallen as much as 10.6 percent after this morning's announcement.

By 12.01pm ANZ shares were down 10.4 percent at A$15.90.

- © Fairfax NZ News