Another black day for banks

ANZ yesterday revealed the extent of losses it expected this year after debacles like Bill Express, Centro and Opes Prime, and National Australia Bank faced more fallout from Friday's news of soured US mortgage-linked investments.

NAB confirmed late yesterday that most investors in its $850 million bond sale last week pulled out after news of its $1.01billion in provisions for US mortgage-related losses. Suncorp-Metway, meanwhile, denied rumours it had cut lending to finance brokers for vehicles, plant and equipment.

Banking stocks suffered another horror day after the falls suffered on Friday following NAB's announcement.

The biggest five banks have lost $29.1billion in market cap in two days, according to Bloomberg data.

ANZ chief executive Mike Smith said the bank's 2008 earnings per share would be down 20-25% on 2007, reflecting the $1.2 billion the bank has set aside for what are expected to be substantial losses in the second half. About $375 million is in "collective provisions" to cover losses stemming from the deterioration in global credit markets and the slowdown in the Australian and New Zealand economies.

Another $850 million is to cover the likes of Centro and Opes Prime - "certain commercial property clients, securities lending and Bill Express".

First-half provisions are already $980 million - bringing the total to $2.18 billion. The likely losses will wipe out the 9% profit growth ANZ otherwise would have enjoyed.

"The market is expecting bad-debt provisioning to increase, but the magnitude of the ANZ increase was a surprise," said Evans and Partners chief investments officer Mike Hawkins.

Mr Smith said the news was "beyond disappointing", saying that despite the credit crisis, higher funding costs and higher food and oil prices, ANZ was "picking up steam".

But investors hammered ANZ shares down 11%, or $1.94, to $15.81, following an 8.7% decline on Friday.

Other banking stocks were hit - NAB fell a further 2.9%, Commonwealth ped almost 5% and Westpac almost 8%.

Bell Potter Securities head of wealth management Heather Zampatti said panic buying early last week, on hope that the outlook had improved, had rapidly turned to panic selling after NAB chief executive John Stewart warned: "We're not at the bottom."

"All of this reaction was because we'd felt a bit sheltered from what's going on globally," Ms Zampatti said. "ANZ and NAB have shown that we can't help but have some exposure."

ANZ's warnings on the New Zealand economy sparked concerns for the trans-Tasman operations of the other members of the Big Four.

Mr Hawkins said: "The New Zealand deterioration has implications for all the banks to a varying degree."

The bad news continued for NAB last night when it emerged that most investors in its $850million bond sale last week had pulled out.

NAB had been asked why it had gone ahead with the sale just before shocking investors with the $830 million rise in provisions on Friday.

"They were told on Friday they could tear up their tickets if they wished," a bank spokeswoman said. "Thirty per cent have chosen not to do so."

Lend Lease chairman David Crawford is completing a review of ANZ's securities lending operations. The review is expected to be ready late next month.

Mr Smith continued to blame "legacy issues" for some of the ANZ's woes.