SHARES in ANZ fell 11 per cent in early trade after the bank flagged a $1.2 billion second half credit provision and said its annual profit could fall by up to a quarter.
At 10.18am (AEST), ANZ (anz.ASX:Quote,News) shares had fallen $1.89, or 10.65 per cent, to $15.86 after dropping as low as $15.40. By noon its shares were down $1.80, or 10.14 per cent, at $15.95.
ANZ fell about 9 per cent on Friday after banking stocks were dragged down by National Australia Bank (nab.ASX:Quote,News) announcing a $830 million additional write-down linked to investments in US mortgage debt.
ANZ’s expected $1.2 billion second half provision adds to a $980 million provision booked in the first half.
The bank said today the the losses were expected to drive its annual cash earnings per share down by between 20 and 25 per cent. The bank said its 2008 cash profit was likely to be over $3 billion and it expected to maintain its full-year dividend at 136 cents per share.
Provisions are ’sensible’ move
Federal Treasurer Wayne Swan said it was sensible of ANZ to make provisions for potential losses, adding he was satisfied with the level of disclosure.
“These potential losses come from decisions, investment decisions, poor investment decisions taken over a period of years, as well as the fallout from the global financial market events.”
He said it’s important for chief executives and boards of banks to accept responsibility for their circumstances.
“From day one, this Government has said that it is important that financial institutions declare their positions.
“That sort of transparency is very important and that’s what we’re seeing today.”
He said the fact major banks were making extra credit provisions shows Australia is not immune to developments in global financial markets, but added the local banking system was robust.
“I think we shouldn’t lose sight of the fact that we do have a strong, well-regulated banking sector which is capable of withstanding the fallout from these international developments.”
NAB fell $1.11, or 4.18 per cent, to $25.45, Commonwealth Bank of Australia fell $2.25, or 5.2 per cent, to $41.00 and Westpac fell $1.19 or 5.39 per cent, to $20.90.
