National Australia Bank Ltd. and Australia & New Zealand Banking Group said rising bad debts are eroding profit growth as losses spread from financial markets to the wider economy, Bloomberg reported.
National Australia Bank, the country's biggest by assets, today said quarterly earnings stalled at A$1.1 billion ($716 million) as provisions rose 19 percent from the preceding three months. ANZ, the nation's fourth-biggest lender, forecast first- half profit will drop by more than 15 percent from a year earlier.
The global financial crisis is catching up with Australian lenders, which have so far avoided the losses posted by banks including Deutsche Bank AG and Bank of America Corp. Macquarie Group Ltd., Commonwealth Bank of Australia and Suncorp-Metway Ltd. this week said profits will fall as the nation's 17-year economic expansion falters and delinquent loans rise.
"The bad debts now are mainly in the corporate area and that's manageable, but if they started gathering steam in the mortgage area, the banks will have something to worry about," said Rob Patterson, who manages about $2 billion at Argo Investments in Adelaide, Australia. "While the Australian financial sector is holding up when compared to its international peers, the risk is rising unemployment and mortgage stress."
National Australia Bank said "further weakness" is expected in its Australian banking operations over the remainder of its financial year to Sept. 30. The Melbourne-based company set aside A$824 million for bad and doubtful debts during the quarter, with A$521 million of this for specific loans and the remaining A$303 million in collective provisions reflecting a drop in customer credit ratings, it said in a trading update.