Westpac (WBC) has added its bit to the current round of updates and profit reports, and in doing so has sort of calmed investor concerns about bad debts.
This morning it will be the turn of the ANZ to flesh out its update which was briefly mentioned in its $3 billion capital raising announcement a couple of weeks ago.
Westpac said yesterday its asset quality continues to improve despite the fact stressed loans in some of the bank’s retail, manufacturing and utilities portfolios are rising.
In a third quarter market update on asset quality and capital, Westpac said in the manufacturing and utilities sectors, a rise in stressed loans was “isolated to a small number of names” while in the retail bank, a small tick-up in stressed loans "aligns with the small increase in delinquencies".
The higher delinquencies were seen in Western Australia and Victoria, Westpac said, which helped push up mortgage 90+ days delinquencies by 2 basis points to 49 basis points. Meanwhile, car loan 90+ days delinquencies were “a little higher".
The so-called Pillar 3 update saw Westpac’s shares rise 1.9% to $31.94 yesterday, helping the wider market steady and edge higher. Pillar 3 updates contain data on the banks capital, loans and the health of the loan book. There are no financials included.
Another factor was the resumption of trading in the Commonwealth Bank after its big fund raising started last week.
The concentration on bank bad debts comes after the ANZ increased provisions for bad debts to $366 million, up 32% compared to the previous three-month period.
ANZ CEO Mike Mr Smith will provide a briefing to the market this morning which is expected to see him explain the reason for the increase and answer criticisms about the niggardly deal offered small shareholders in the $3 billion raising.
In its trading update last week, the National Australia Bank said bad debt charges fell 15% to $193 million in the quarter (but the NAB had increased the provision a year ago).
And last week, the Commonwealth said it had seen a small rise in bad debts in its personal lending book in Western Australia and Queensland, which was a function of unemployment in some areas, but across the bank impairments remained at historic lows.
Big four say bad debts under control
Westpac said in yesterday’s update its stressed assets were down by $320 million or 3%, to $9.85 billion. Australian credit card 90+ days delinquencies were down, stress in the commercial property portfolio continued to reduce, and stress in mining was down with less than 1% of exposures in default. Fewer loans are on Westpac’s watch-list for substandard debt.
The Commonwealth told the ASX yesterday that the institutional component of its $5 billion rights issue had been completed, raising around $2.1 billion with around 90% of entitlements being exercised by eligible institutional shareholders. Those that did not exercise their rights received $6.50 in cash for each entitlement sold in the institutional bookbuild. The retail component will open next Monday and is expected to raise around $3 billion.
CBA shares opened at $80.50, 1.5% below their adjusted last closing price of $81.77 (to take into account the dilution of the raising). The stock climbed during the morning session and then eased to close at $81.27 yesterday, down from the last adjusted close.
ANZ shares closed at $29.52, up 0.8%, but still more than 9% below the $32.58 close before its capital raising was announced and triggered a nervous sell-off in the sector and the wider market. National Australia Bank shares finished up 1.6% at $32.26.
