ANZ Bank, one of the top four banks in Australia, stated that it is facing an additional $100 million burden of bad debts on the back of higher exposure to the struggling mining and resources sector.
In February, ANZ stated its bad debts will amount to $800 million as reflected in the first half accounts, reports Sky News. The additional write-down of at least $100 million has been caused by the loans extended to the crisis-ridden resources-related companies, which do not only include local firms but also global ones as well.
“While the overall credit environment remains broadly stable, we are continuing to see pockets of weakness associated with low commodity prices in the resources sector and in related industries,” Chief Financial Officer Graham Hodges said.
For ANZ and other Australian banks, the predicament is huge as commodities and oil prices are at a decade’s low and the Australian resources sector continues to battle a prolonged downturn from the falling demand from China and a global oversupply.
Meanwhile, some analysts pointed out that the ANZ bank has not disclosed the specifics of its bad loans, in terms of the companies or the quantum of loans that led to the write-down.
Tim Buckley, a former Citibank analyst, said the ANZ announcement coincides with two developments. One is the warning by coal giant Peabody Energy that it is on the brink of bankruptcy after it defaulted interest payment of $93 million, reports The Guardian.
Buckley expressed the apprehension that Peabody may have some outstanding debt to ANZ and a resulting dent in the bank’s balance sheet is natural. However, he said, things will only be cleared up after Peabody files its bankruptcy documents.
The Australian Financial Review reported a specific case in Queensland where a coal mine WICET is seeking a debt-for-equity swap with its creditors. In the past, The Guardian had reported that all the big four Australian banks had signed off a $5.5 billion worth loans to the fossil fuel industry in Australia.