Reports
ANZ Says Has Low Business Exposure To China Woes
The Asia-Pacific banking group set out what it says is a sharply improved position over its exposure to adverse market events in the region and wider financial world.
While global policymakers fret about economics and the impact of a slowing China, one of Asia-Pacific’s main banks has stated that its balance sheet and resilience in the face of financial shocks has strengthened sharply.
At a conference in Hong Kong, Australia and New Zealand Banking Group said that its institutional Asia exposure at default – or EAD – stood at A$104 billion ($74.1 billion) at 30 June, about 12 per cent of its total EAD. The exposure at default for China was around 3 per cent of the global total, of which $9 billion was onshore.
Some 88 per cent of ANZ’s China EAD has a tenor of less than one year including trade and supply chain and bonds compared with 50 per cent for institutional overall, the bank said.
With China’s mainland equity market having fallen this year, erasing gains until mid-summer, and evidence of decelerating growth in the world’s second-largest economy, it has ignited concerns about banks’ exposure to market movements.
In an interview with ANZ’s BlueNotes publication regarding the global economic environment and the investor presentation to be published today, ANZ chief executive Mike Smith said: “Compared to where we were pre-crisis we look like a very different bank. We have a very strong balance sheet, a very good credit book and a very good capital position.
“We have a very high quality exposure in China and therefore return is going to be a little lower than if you were to go up the risk curve. The alternative in terms of the institutional bank is to look for growth in Australia at a much higher risk. We have not done that…And the credit quality of the group is better than it ever has been,” he said.
“China only accounts for about 3 per cent of our total outstandings as a group which is very small. The significance of that is that 88 per cent of our exposure to China is of a tenor of less than one year which…means that should there be issues, our ability to reduce our exposure is very straightforward,” Smith said.
