Westpac expects blow-out

Press, 16 August 1989, Page 41

Westpac expects blow-out

NZPA-AAP Sydney Australia’s largest bank, Westpac Banking Corp, expects bad debt provisions to blow-out in the latest six months due to the impact of high interest rates and its exposure to collapsed property and retail firm Hooker Corp. Westpac said in a statement its provision against the income for bad debts and loan losses in the six months to September 30 would increase by 15 to 20 per cent from the sAust226 million (SNZ293M) it set aside in the „ x months to March 31.

Westpac said in the statement its exposure to Hooker and related companies was about J2B6M (SNZ37IM). Westpac’? statement was filed with the Securities and Exchange Commissi'... in regard to a forthcomirs debenture issue.

The statement said two merchant bank subsidiaries that operated at the high risk end of the market, Partnership Pacific, Ltd, and New Zealand-based Westpac Merchant Finance (WMFL), were again expected to account for a substantial portion of writeoffs.

WMFL had previously been affected by the depressed economic conditions in New Zealand while Partnership Pacific had suffered badly after the October, 1987, stockmarket crash.

The latest problems with Partnership Pacific and WMFL were due to high interest rates in Australia and New Zealand and the depressed property market in New Zealand.

Westpac is the first bank to publicly reassess loan loss provisions since Hooker Corp went into provisional liquidation in July. In the light of new capital adequacy requirements, Westpac directors decided the general allowance for loan losses should be calculated by the reference to the amount of risk-adjusted assets held on and off balance sheet as calculated in accordance with Reserve Bank guidelines.

The loan loss provision stated on March 31 of sAust226M (JNZ293M) was 25 per cent, or $45.2M (JNZSB.7M), higher than the loan loss provision of SIBO.BM (5NZ234.6M) for the corresponding period in 1988.