Bad debt modelling for ANZ vs WBC
Quote:
Originally Posted by
winner69
Interesting times for the aussie banks
A further comparison on the two NZX listed Aussie Banks.
Figures represent all of the respective ANZ and WBC businesses and dollar amounts are $A.
ANZ |
|
Annual Impaired Asset Expense (A) |
Total Impaired Asset Provision (B) |
(A)/(B) |
Net Receivables (impairment included) |
(B)/(C) |
EBT (before impaired asset exposure) |
(A)/(D) |
2011 |
$1,237m |
$3,646m |
34% |
$400,953m |
0.9% |
$8,909m |
13.9% |
2012 |
$1,198m |
$4,538m |
26% |
$432,361m |
1.0% |
$9,192m |
13% |
2013 |
$1,188m |
$4,354m |
27% |
$487,618m |
0.9% |
$10,265 |
11.6% |
2014 |
$986m |
$3,933m |
25% |
$525,685m |
0.7% |
$11,294m |
8.7% |
2015 |
$1,179m |
$4,017m |
29% |
$574,255m |
0.7% |
$11,712m |
10.1% |
WBC |
|
Annual Impaired Asset Expense (A) |
Total Impaired Asset Provision (B) |
(A)/(B) |
Net Receivables (impairment included) |
(B)/(C) |
EBT (before impaired asset exposure) |
(A)/(D) |
2011 |
$993m |
$4,414m |
22% |
$501,023m |
0.9% |
$9,507m |
10.4% |
2012 |
$1,212m |
$4,241m |
29% |
$518,686m |
0.8% |
$10,026m |
12.0% |
2013 |
$847m |
$3,949m |
21% |
$540,113m |
0.7% |
$10,619 |
8.0% |
2014 |
$650m |
$3,481m |
19% |
$588,824m |
0.6% |
$11,400m |
5.7% |
2015 |
$753m |
$3,332m |
23% |
$626,648m |
0.5% |
$12,109m |
6.2% |
And just for good measure, I will throw in the equivalent table for Heartland bank, even though that bank is not strictly comparable.
Heartland Bank |
|
Annual Impaired Asset Expense (A) |
Total Impaired Asset Provision (B) |
(A)/(B) |
Net Receivables (impairment included) |
(B)/(C) |
EBT (before impaired asset exposure) |
(A)/(D) |
2012 |
$5.642m |
$27.426m |
21% |
$2,105.702m |
1.3% |
$29.337m |
19% |
2013 |
$22.527m |
$50.491m |
45% |
$2,060.867m |
2.4% |
$36.540 |
62% |
2014 |
$5.895m |
$16.381m |
36% |
$2,623.767m |
0.6% |
$57.416m |
10% |
2015 |
$12.105m |
$25.412m |
48% |
$2,887.482m |
0.9% |
$76.304m |
16% |
Points I note.
1/ Westpac have significantly lower impaired receivables, compared to total receivables. Furthermore Westpac is experiencing a steady reduction in the annual impairment balance sheet disclosure that the others are not experiencing.
2/ Heartland have a significantly higher annual impairment charge, relative to the total balance sheet annual impairment provision. A function of operating in a riskier loan space?
3/ ANZs write offs with respect to earnings are rather greater than Westpacs.
SNOOPY
Industry Sector Risk FY2015: ANZ vs WBC vs Heartland
The following division of loans is how the ANZ bank in Australia segments them. Loan categories from other banks have been adjusted in some instances to fit into this ANZ model.
Loan Category |
ANZ Loan Book FY2015 (gross) |
ANZ Loan Book FY2015 (%ge) |
WBC Loan Book FY2015 (gross) |
WBC Loan Book FY2015 (%ge) |
HBL Loan Book FY2015 (gross) |
HBL Loan Book FY2015 (%ge) |
Agriculture, Forestry, Fishing and Mining |
$39,610m |
4.7% |
$22,671m |
2.9% |
$576.577m |
17.8% |
Business and Property Services |
$51,000m |
6.1% |
$74,793m |
9.7% |
$396.939m |
12.2% |
Construction |
$7,609m |
0.9% |
$7,682m |
1.0% |
|
|
Entertainment, Leisure and Tourism |
$11,797m |
1.4% |
$8,416m |
1.1% |
|
|
Finance and insurance |
$230,710m |
27.5% |
$95,694m |
12.4% |
$377.318m |
11.6% |
Government and Local Authority |
$52,524 |
6.2% |
$75,936m |
9.9% |
|
|
Manufacturing |
$34,432m |
4.1% |
$18,501m |
2.4% |
$93.779m |
2.9% |
Personal lending |
$330,925m |
39.5% |
$419,764m |
54.5% |
$1,397.003m |
43.1% |
Electricity, Gas and Water Supplies |
$9,795m |
1.2% |
$7,445m |
1.0% |
|
|
Retail & Wholesale trade |
$38,528m |
4.6% |
$22,774m |
3.0% |
$276.527m |
8.5% |
Transport and storage |
$14,783m |
1.8% |
$13,895m |
1.8% |
$20.068m |
0.6% |
Other |
$16,455m |
2.0% |
$2,358m |
0.3% |
$102.317m |
3.2% |
Total |
$838,248m |
100% |
$769,929m |
100% |
$3,240.468m |
100% |
OK I have included Heartland because I know it has quite a few fans out there. It isn't really comparable as the loan bbok is less than 1/200th the size of ANZ or WBC. However, one thing to note is that in primary sector lending (agriculture, forestry, fishing and mining), in relative terms, the exposure of Heartland is five times that of a big Ozzie bank.
So accordingly Heartland is much more exposed to a primary sector downturn than the other two.
On page 11 of the WBC annual report this quote appears:
"Westpac has been underweight in the mining and mining services sector for some time."
The ANZ 'primary sector' exposure is significantly greater than WBC (4.7% vs 2.9%). But to say ANZ is 'overexposed' to mining and agriculture might be calling things too far. If anything ANZ are 'overexposed' to finance and insurance. A big chunk of that exposure (not shown on the table) is 'overseas' (which means outside of Australia and New Zealand in this context). Another bias in the ANZ Asian expansion is that Asian manufacturing loans outgross loans to Australian and New Zealand manufacturers combined. OTOH personal lending by ANZ is relatively much less in Asia.
From a Westpac perspective they are more into property and business loans, and also personal loans than ANZ.
What we have here between ANZ and WBC is two broadly similar companies, but with enough difference in emphasis to ensure that ANZ vs WBC is not quite the apples with apples comparison that some might think.
SNOOPY