by Greg Canavan, Contra Corner:
This is interesting…
This morning, ANZ Bank [ASX:ANZ] warned that loan defaults would be ‘at least’ $100 million more for the first half of the year than it flagged just a few weeks ago. The charge will now be over $900 million.
The increase in bad debts relates to ongoing weakness in its resources loan book. That’s not really surprising when you consider the prolonged commodity bear market.
What is surprising is that you haven’t seen the banks take more of a hit from their exposures.
Given the preference of banks to lend against Aussie residential property, their overall exposure to the resources industry is low. According to the Financial Review, ANZ has 1% exposure to resources (as a percentage of its total loan book), second only to the Commonwealth Bank [ASX:CBA] with 2% exposure.
Still, such a small exposure doesn’t help when things turn south, as they certainly have in the commodity space over the past few years.
And while commodity prices have had some respite over the past few weeks, I would argue that it’s simply another bear market rally. The long term downward trend remains intact.
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