Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Disclaimer: The Parliamentary Library does not warrant or accept liability for the accuracy or usefulness of the transcripts. These are copied directly from the broadcaster's website.
ANZ profit down -

View in ParlViewView other Segments

ANZ profit down

The World Today - Thursday, 23 October , 2008 12:14:00

Reporter: Peter Ryan

ELEANOR HALL: The ANZ Bank today delivered its first full year profit decline in 11 years. It was
down 21 per cent to $3.3-billion dollars.

Australia's third biggest lender said its delinquent loans had quadrupled and it wrote down another
$1.4-billion dollars in bad credit and exposure to risky investments in derivatives.

But while the ANZ's chief executive Mike Smith was downbeat as he delivered the result, he said he
thinks Australia will avoid a recession because of its strong links to Asia.

Business editor Peter Ryan has our report.

PETER RYAN: Eight months ago, Mike Smith described the earthquake rocking global markets as a
"financial services bloodbath".

And today as he delivered a 21 per cent decline in full year profit - the ANZ's first since 1998 -
the analogy was decidedly more personal.

MIKE SMITH: Well, you know, it is a bit like walking into a buzz saw isn't it that you know, when
you look back, it has been a long year.

But having said that, I think we have managed to position the bank in a very, very difficult time.
Perhaps fortuitously this happened now rather than in a couple of years.

PETER RYAN: Mike Smith has just completed his first year in what's perhaps Australia's toughest
banking job.

During that time, he's seen the global banking system go to the brink of catastrophe, agreeing a
few weeks back that the United States would go into depression if the US Congress rejected the
$700-billion bailout plan. Even joking he would be looking for a job on a farm.

Today, he was slightly more upbeat but still cautious.

MIKE SMITH: I think what I said was that I'd take up farming if they didn't approve the plan and
they have done so I can probably put off my plans to go to the farm for the time being.

But we are not out of the woods yet. You know, there is still, there is still quite a long way to
go and there is going to be a lot of choppy water and the credit markets are going to be very
volatile and very unpredictable for some time.

PETER RYAN: While Mike Smith believes a deep recession is unavoidable in the United States and
Europe, he thinks Australia can remain immune - but only because of its economic relationship with
Asia - in particular China.

MIKE SMITH: We will not go into recession. I don't think we will go into recession. We will
definitely slow. You know, there will be a significant slowdown off the back of the global slowdown
but I think it will naive to expect us to be immune to what is happening in the world.

The fact that our trade and our businesses are aligned with Asia has got to be a positive and
therefore I am much more optimistic about the future than perhaps others are.

We are forecasting 1.8 per cent growth 2009. That is not a high figure but it is much bigger than
most of the rest of the OECD.

PETER RYAN: But a surge in provisions for bad debt to $1.9-billion including a $700-million charge
for exposure to risky derivatives have combined to damage Mike Smith's vision for the ANZ to become
an Asia super bank.

MIKE SMITH: The fact that this market dislocation and crisis has created these models actually
almost within six months is quite staggering really but you know, we were right with the model just
not with the timing and I still believe that our overall strategy to create a super regional bank
in this region is the right one.

PETER RYAN: The ANZ has also been exposed as chief creditor to the now collapsed stock lending firm
Opes Prime, and the sinking share market has seen ANZ shares fall 35 per cent this year.

Even so, Mike Smith says the consistently wild share market swings such as today's almost six per
cent fall on Wall Street are no measure of value.

And he seemed exasperated as individual share markets continue to chase each other's tails.

MIKE SMITH: I still don't really understand the blind following of the ASX to the Dow Jones. You
know, I really do not get that.

US corporates have got a very different earnings outlook and very different economy from Australian
corporates and the outlook in Australia and I think there should be more of a disconnect between
those markets.

PETER RYAN: The current carnage represents Mike Smith's seventh financial crisis although he is
emboldened at the helm of one of the world's 14 double-A rated banks. He is also confident that the
rating the ANZ shares with the rest of Australia's Big Four will remain in place, unless there's a
global adjustment in standards as ratings agencies themselves face greater scrutiny.

ELEANOR HALL: Business editor Peter Ryan.