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UPDATE 1-ANZ CEO Smith plays down bad debt concerns, reinforces Asia strategy

Published 18/08/2015, 01:49 pm
© Reuters.  UPDATE 1-ANZ CEO Smith plays down bad debt concerns, reinforces Asia strategy
ANZ
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* ANZ posts 13 pct increase in bad debt charges in Q3

* Bad debts will rise but don't see significant jump - Smith

* 9-mth cash profit up 4 pct to A$5.4 bln

* Shares down 0.4 pct in a weak Australian market (Recasts on bad debts, adds QUOTES, shares)

By Swati Pandey

SYDNEY, Aug 18 (Reuters) - Australia and New Zealand Banking Group ANZ.AX CEO Mike Smith on Tuesday played down concerns over rising non-performing loans in Australia's banking system, following a 13 percent rise in the lender's third-quarter bad debt charges.

Smith told analysts at a post-earnings call on Tuesday that defaults would likely increase in the coming quarters but he did not see any significant jump from current levels.

The comments are likely to soothe investors after a heavy sell-off in Australian bank stocks in recent months on concerns that tighter capital requirements could spell the end of a golden era of record profits and lush dividends.

"The question to ask is: Are we at the bottom of the cycle? And I guess the answer to that is: Yes. Is it going to get significantly worse? I don't think so," Smith said.

ANZ's unaudited cash profit for the nine months to end-June rose 4 percent to A$5.4 billion ($3.98 billion) led by growth in Australian mortgages and higher income in the global markets business. Bad debt charges climbed as ANZ kept aside more capital for mining and New Zealand dairy-related exposures.

ANZ estimated that the total impairment charge for the current financial year-ending September will be about A$1.2 billion, or 21 basis points compared to 19 basis points a year ago.

"They spent more time explaining the increased provisioning in Australia and New Zealand. They played those down suggesting it wasn't a meaningful turning point," Morningstar analyst David Ellis said.

Smith also reinforced the bank's commitment to its Asia strategy, saying the diversification continues to provide it with "differentiated sources of revenue and future growth options".

Earlier this month, ANZ unveiled a A$3 billion share placement offer, sending its shares diving on concerns about the likelihood of more capital raising to meet new regulatory requirements and the prospect of slower growth for the nation's banking sector.

ANZ shares were down 0.4 percent at A$29.4 at 0314 GMT in a broader market that was 0.16 percent lower. ($1 = 1.3561 Australian dollars) (Editing by Stephen Coates)

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