Just four big customers squeezed Westpac’s half-year results lower than expected, adding $252 million to its bad debt charge.
Westpac didn’t name the four customers causing extra provisions but we know the bank is exposed to a few of the recent high profile corporate troubles.
These are: steel maker Arrium, law firm Slater and Gordon, Wiggins Island Coal Export Terminal in Queensland, logistics group McAleese and Peabody with its coal mines in Queensland and New South Wales.
UBS estimates a $809 million exposure by Westpac to these high risk positions.
Analysts see loan impairment provisions rising across all four major banks. The ANZ and NAB, due to report their results as well this week, are also expected to show a deterioration in the quality of their loans books.
This chart from Westpac shows the growth in impaired assets at the bank, from the new provisions added on the left to write-offfs, the impact of delinquencies and the totals by quarter:
The overall impairment charges for the first half were $667 million, up $255 million or 62% compared to the second half of 2015.
Westpac’s impairment charges to average loans almost doubled to 21 basis points from 11 basis points a year ago.
The big loser was Westpac’s Institutional Bank where cash earnings were down 25% to $173 million, due to a $193 million increase in impairment charges.