AUSTRALIA’S biggest banks could not withstand a global financial collapse, new research has found, raising questions about the sustainability of their assets and the viability of their business models.
Key points:Australia’s biggest banking group, ANZ, is one of the worst-performing banks in the world, with a loss of $9.3bn in its latest quarterThe findings by consultancy Deloitte show that even the Australian Federal Government could not rescue the banksThe ANZ group, which owns the country’s biggest bank, ANB, has lost $9 billion in its last two quarters.
“It’s not only the banks that have a problem, the governments are also facing this challenge,” Professor Richard Dickson, from Deloise, said.
“There are the financial institutions that have been hit by this crisis, but there’s also the government, the banks and the big companies that are not very well supported.”‘
Not in the cards’The ANB group, based in Sydney, has suffered the biggest losses in its history.
The bank has $20 billion in capital and about $3 billion in liquidity at the end of March, but is only profitable for about $2 billion in the last 12 months.
“I think the fact that there’s a lot of collateralised debt, and the size of the collateral, means that the ANZ is not in the front of the queue,” Professor Dickson said.
The ANA group is Australia’s third largest, with $15.6 billion in assets.
It was the second-biggest performer in the first quarter, with losses of $1.8 billion.
“In the last two years the ANA has had a $1 billion capital reduction and that was due to the economic situation, the economic shock, and then there’s the financial shock,” Professor Daniel Wilson, from the University of Sydney’s School of Economics, said in a statement.
“But the fact is that the banks have been undercapitalised, the capital adequacy of the banks has been poor, and that’s not in their cards at the moment.”
“They need to take some of the risk off their balance sheets and move forward and build on what they’ve built,” Professor Wilson said.’
They need more money’Professor Wilson said the bank’s losses are not surprising given the size and financial strength of the Australian Government.
“You could have been looking at ANZ in its prime, with almost $25 billion of capital, and it’s now losing $2.5 billion a year, so that’s $5 billion of risk,” he said.
Professor Dickson says a “strong, reliable” government will not help the banks as long as the Government is unable to borrow to support the banks.
“The Government should be able to borrow from banks,” Professor Dr Wilson said, “and they are not in that position.”