Bank results to shed light on crisis

The full-year results over the next two weeks from three of Australia's biggest banks will shed more light on the extent of losses caused by the surge in credit rates and weakening economy.

National Australia Bank Ltd (NAB) and ANZ Banking Group Ltd have already said earnings will be hurt by provisions of over $1 billion each while Westpac Banking Corporation will be relatively unscathed.

The shares reflect that, with NAB and ANZ slumping 42 per cent and 38 per cent respectively this year while Westpac has declined 22 per cent.

The benchmark S&P/ASX 200 Index has dropped 37 per cent in the same period.

Australia's biggest bank by assets, NAB, will kick off next week by reporting its results for the 12 months to September 30, after bringing the date forward by 10 days to October 21.

ANZ, the smallest of the big four, is expected to report two days later on October 23 and Westpac, aiming to take over St George Bank Ltd, on October 30.

The average of analyst forecasts predicts cash earnings at Melbourne-based NAB and ANZ to slump 10 per cent and 20 per cent respectively.

Westpac, based in Sydney, is expected to grow earnings by 6.1 per cent as it has so far avoided large losses related to the credit crisis, although Australia's third largest bank has indicated provisions will rise because of the economic environment.

"We'll get some idea of the credit risk and whether the problems we've seen ... are spreading into the generic corporate sector," Austock Securities analyst John Buonaccorsi said.

"We'll see the impact on margins. They've had all this repricing of lending."

Mr Buonaccorsi said the banks were unlikely to give detailed guidance for fiscal 2009 because of the unstable situation in global markets.

"I don't think they'll be too forthcoming on guidance," he said.

Shares in NAB closed the week at $21.60, ANZ at $16.85 and Westpac at $21.48.

NAB said it will report a 11 per cent decline in cash earnings to about $3.9 billion, around the market consensus, and foreshadowed capital raisings to bolster the bank's balance sheet.

ANZ has said it expects cash earnings per share to fall 20 per cent to 25 per cent and the total figure to be over $3 billion.

Westpac, which will become Australia's second biggest bank if successful in its bid for St George, is forecasting cash earnings growth of between six per cent and eight per cent.

Commonwealth Bank of Australia Ltd, the only one of the big four to report on a year to June basis, announced its results in August.

The bank, which increased full-year cash earnings by five per cent to $4.73 billion, is Australia's biggest bank by market value and home loan lender.

The average forecast by analysts for cash earnings, according to Reuters Data, is $3.94 billion for NAB, a 10 per cent decline from the $4.39 billion in fiscal 2007.

The consensus number for ANZ is for cash earnings to slump 20 per cent to $3.13 billion while analysts expect Westpac's to rise 6.1 per cent to $3.72 billion.

Mr Buonaccorsi is expecting cash profit after tax for NAB of $3.96 billion, $3.22 billion for ANZ and $3.79 billion for Westpac.

The three banks have lent to companies that are already struggling for survival, such as Centro Properties Group and Allco Finance Group.

The Centro exposure reported in the media is $1.2 billion for ANZ, $1.1 billion for NAB and $320 million for Westpac, according to Goldman Sachs JBWere analysts James Freeman, Ben Koo and Elizabeth Rogers.

NAB has already announced $1.4 billion in provisions from investments in collateralised debt obligations (CDOs), debt from various places bundled together into securities which pay interest.

Some of the CDOs NAB bought were backed by US sub-prime mortgages - home loans lent to people who were unlikely to make the repayments, on the assumption property values would rise.

ANZ's provisions were likely to total about $2.2 billion, with $1.2 billion of that for the second half.

ANZ said in a statement in July that cash impairment costs would remain high because of the deterioration in credit markets, a weak New Zealand economy and softening Australian economy.

Westpac announced October 17 it would take a charge of $226 million for initiatives to raise productivity and costs related to the proposed St George Bank Ltd takeover.