Westpac sees credit losses of up to NZ$100 million from the Christchurch earthquake

Westpac New Zealand has become the first of the country's major banks to release specific figures on the financial impact it expects from the February 22 Christchurch earthquake saying it expects credit losses of between NZ$30 million and NZ$100 million.

The bank released a brief statement today on the likely financial impact of the earthquake on its first half year financial results for the period ending March 31, 2011. Westpac said the extent of the damage from the February earthquake was greater than that resulting from last September's earthquake in Christchurch.

"The precise financial impact is difficult to quantify accurately at this stage as, amongst other things, responses by local and central governments are still being developed and insurance recoveries are being worked through," Westpac said.

"Credit losses from the event are currently estimated to be between NZ$30 million to NZ$100 million. The impact will be reassessed as more information becomes available. This may result in changes to the estimates of loss and thus the provision required. The impact on Westpac’s Tier 1 capital position is not expected to be material as provisioning required can be absorbed within anticipated Westpac operating profit."

Meanwhile, Kiwibank CEO Paul Brock told interest.co.nz in a Double Shot Interview last week that the earthquake would "undoubtedly" have an impact on provisioning levels across the banking sector. However, Reserve Bank Governor Alan Bollard told Parliament's Finance and Expenditure Select Committee that the likely extent of provisioning by banks for loans in the Christchurch area looks "handle-able."

(Updates add Paul Brock and Alan Bollard's comments).