New Zealand a burden for ANZ

The continuing strife in ANZ's New Zealand businesses may not faze equity investors for the time being.

The details - including a threefold rise in the charge for provisions to somewhere near NZ$1 billion - serve as a reminder that optimism over the outlook for the global economy, and Australia's as well, has to be tempered by the reality of banking systems that have to work through the strain of the two year old credit crunch.

In New Zealand's case the financial stress is partly home grown and predates the 2007 worldwide credit meltdown.

ANZ said it expects the provision charge in New Zealand to be three times the NZ$302 million incurred in 2008.

Commercial and institutional clients account for more than 40 per cent of that rise, while a single "trade finance exposure" accounts for eight per cent of the increase in provision.

The increased charge for provisions from ANZ's New Zealand business accounts for almost all the rise in provisions expected by ANZ at group level.

Other local factors are pulling down profit in New Zealand, including the bailout of two investment funds promoted by ING New Zealand (of which ANZ owns half). ANZ's share of this bailout is now NZ$147 million.