ANZ is being hit by deteriorating credit markets in Asia

Maura Baru district in Jakarta. Ed Wray/Getty Images

Shayne Elliott, not yet two months into the job of running the ANZ bank, is taking steps to meet what he sees as a deteriorating credit market, mainly in SE Asia.

The Asia business, so loved by previous CEO Mike Smith, is now being impacted by slowing economic growth and market volatility.

“Our exposure in Asia is predominately short tenor, investment grade lending, nevertheless the slowdown in the region and increased market volatility are seeing credit conditions become more difficult in the second quarter,” he said when commenting on the bank’s first quarter update.

“Our business in China remains steady with the impact primarily in manufacturing and trade-exposed sectors in South-East Asia.”

Elliott anticipates the total group credit charge will be a little above $800 million this half, compared to current market consensus of $735 million.

He made the comments when releasing the bank’s quarterly report showing a 4% rise in December quarter cash profit to $1.85 billion. The result puts the bank on track to exceed last year’s weaker than expected $7.2 billion cash profit, a modest rise of just 1%.

“I think what we saw though, at the beginning of this calendar year, is that it’s been a little bit more volatile than we were certainly expecting and some of those conditions have been a little bit more difficult,” he said during a video interview with Andrew Cornell, managing editor of BlueNotes, ANZ’s digital publication.

“It tends to hit in the manufacturing base across Asia-Pacific which today is in South-East Asia, most predominantly Indonesia. And that absolutely is having an
impact in terms of our credit books.”

The credit quality, apart for some weakness around commodity based businesses, has been stable for the ANZ in Australia.

Impaired assets for the half year will be broadly similar to the second half of 2015 despite falling in the first quarter.

Here is the full interview with Shayne Elliot:

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.