Bank’s loss may be higher

Press, 25 February 1989, Page 1

Bank’s loss may be higher

By

OLIVER RIDDELL

in Wellington

The Bank of New Zealand’s disclosed loss of $l6O million may be substantially higher by the end of the financial year, according to its new chairman, Mr Frank Pearson.

He told the Stock Exchange yesterday that the $l6O million figure represented the BNZ board’s and management’s best assessment of the loss as at midFebruary. It had to be emphasised that this $l6O million figure referred to losses in the 10*/2 months to mid-February.

“In the current economic climate it is inevitable that further and possibly quite substantial increases in these figures may be required at March 31,” Mr Pearson said.

He was approached yesterday by the Stock Exchange’s executive director, Mr Roger Gill, for an explanation on why the bank’s provisions for bad and doubtful debts had risen so substantially since its last statement to the Stock Exchange on January 27. “I am sure the Stock Exchange realises that the bank’s business is a dynamic one and the process of reviewing loan loss provisions is on-going,” Mr Pearson said.

Between the end of March and the release of the bank’s results there would be a further over-all review of the total loan book to reflect the up-to-date position. “At this stage it is premature to speculate on what the final figure might be,” he said. There had been many factors that had contributed to the increase in the loss provisions since January 27, but the main ones were:

• The special credit division of the bank set up in December last year was now fully opera-

tional and had been studying all the bank’s exposures and been reviewing the adequacy of provisions where repayment of the debt was in any doubt. • There had been a number of cases where factors not known at the time of the January statement had since crystallised and had required new or additional provisions. • The revised board wished to give a more precise and sharper focus by releasing the actual figures to shareholders. Sniping between members of the BNZ board, and between them and the Government, continues. The former acting chairman, Mr Rob Campbell, who has reverted to being an ordinary board member, yesterday accused Mr Pearson of trying to distance himself from earlier board actions. Mr Campbell said that in announcing the $l6O million figure, Mr Pearson did not have the confidence of the entire board. Mr Pearson replied: “I must say my trust in Mr Campbell declined over time.” Mr Campbell’s response to this was: “Mr Pearson does not have my confidence as chairman.” Mr Campbell declined to be interviewed again yesterday but he issued a press statement that “efforts by Mr Pearson to distance himself from earlier board statements on the bank’s financial position are amusing rather than credible.” Caygill, page 10