New Zealand's big four banks face credit losses of up to NZ$450 million stemming from the devastating February 22 earthquake in Christchurch, according to Sydney-based banking analysts at Deutsche Bank.
Their calculations are "conservatively" based on the upper end of Westpac's estimate that it faces credit losses of between NZ$30 million and NZ$100 million due to the earthquake.
The Deutsche Bank analysts - James Freeman, Andrew Triggs and James Wang - say they expect similar provisions to be taken by BNZ and ASB and have factored in NZ$100 million hits for both. But they expect a larger one, of up to NZ$150 million, for ANZ, which also owns the National Bank.
In a research note Freeman, Triggs and Wang say they have reduced their 2011 cash earnings estimates for the four Australian parents of the New Zealand banks, but only by 1.3% in ANZ's case, 0.8% for ASB's parent Commonwealth Bank of Australia, 1% for BNZ's parent National Australia Bank, and 0.8% for Westpac.
"We would regard the changes as largely immaterial and unlikely to have meaningful impacts on share prices," the analysts say. "We feel we have adopted a conservative stance by taking the upper end of Westpac's range, and the eventual outcomes may be better than we have assumed."
Speaking to interest.co.nz in a Double Shot interview earlier this week, BNZ CEO Andrew Thorburn said although BNZ hadn't yet come up with a specific figure or range of its likely credit losses stemming from the earthquake as Westpac has, he expected a "manageable outcome." Thorburn said part of the "cold reality" was that some Christchurch businesses won't reopen and others that remain viable will have a cash flow shortage for a period of time.
2 Comments
This from the Wall Street Journal:
"U.S. banking regulators have paid out nearly $9 billion to cover losses on loans and other assets at 165 failed institutions that were sold to stronger companies during the financial crisis.
The payments were made under loss-sharing agreements struck by the Federal Deposit Insurance Corp. that shield buyers from much of the risk associated with loans inherited from failed banks. The deals, covering everything from empty Las Vegas shopping centers to nearly worthless mortgages in Florida, are a reminder of the price tag attached to many government programs launched near the worst of the crisis."
http://online.wsj.com/article/SB100014240527487043965045762047527546678…
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.