Big four have extra $8.1bn in their pockets

by BN13 Oct 2009

Having prepared for a worst-case scenario, the major banks suddenly find themselves in the middle of an economic recovery with bad debt write-offs nowhere near what was previously estimated.

The big four had made provisions for $17.7bn in bad debt. The figure is, in fact, likely to be closer to $9.6bn, leaving the majors with $8.1bn to write back into their businesses, according to a report by stockbroker BBY.

The multibillion-dollar windfall could be used to pay special dividends to investors. It would also boost the banks' lending power, however, further consolidating their grip on the mortgage industry. BBY downplayed the possibility of the banks using the money for more mergers with smaller players, citing increased regulatory hurdles.

A spokesperson for ANZ told The Australian that although the rise in bad debts was easing, the economy was still fragile and the bank would be acting very cautiously. "We have uncertainty about the shape of the recovery and the potential for higher levels of capital required by regulators," he said.


  • by Tony H 14/10/2009 9:04:30 AM

    The reduced writeoffs come as no surprise to many in the industry. Writer believes that the huge provision for writeoffs over the last 2 years was simply a way to reduce the all important reportable net profit figure brandished about by the media at results time. After all, the Banks could not allow themselves to be seen by the wider public to be profiting from the global financial crisis. I hazard a guess that it has been very profitable for their bottom lines both now and into the future as they have been able to reposition their products, fees, brokers commissions and competition just to their liking. Bring back the competition!!