ANZ.NZX - Anyone holding?

[Snoopy]

The definition of a 'write off' is not ambiguous. When an asset is gone it is gone! Other categories of loan risk are more fluid. There is not a consistant nomenclature for players in the industry to use. I have used the term 'vulnerable loans ' to mean something lesser on the problem scale than 'stressed loans'. But both of these are lesser problem child categories than the term 'Write Off'. Specifically for UDC and Heartland, the definitions that I have used (for stressed loans) look like this:

	UDC Finance Categories	Heartland Behavioural Categories	Heartland Judgement Categories
Snoopy 'Stressed Loans'	Loan Categories 7 and 8 plus 'Default' loans less Provision for Credit Impairment. {Note: There is no loan category 9}	a/ Loans at least 90 days past due plus b/ Loans individually impaired . plus c/ Restructured assets. less d/ Provision for Impairment	a/ Loans at least 90 days past due plus b/ Loans individually impaired . plus c/ Restructured assets. less d/ Provision for Impairment

The above definitions are not definitive. I am simply tabulating them so that readers can get a comparative sense of what I am talking about

I did remove the credit impairment from my newly named 'Stressed Loans' category. I am not sure if that was an improvement or not! Effectively I am saying that an impaired loan written 'off the books' is no longer stressed. I am also drawing a line in the sand between 'Stressed Loans' and 'Impaired Loans'. I thought this was useful as I wanted to see if the movement of 'Stressed Loans' and 'Impaired Loans' showed a distinct correlation over time between my self defined 'Stressed' and 'Impaired' categories. The idea here was that if a loan (or more correctly portion of a loan) started out 'stressed' before it became 'impaired', one might expect a time slipped correlation between the two. However, 'stressed loans' might be more a 'judgement watch' event which is dependent on the biases of management. OTOH an impaired loan would surely require some management intervention that directly flows through to the account. So there exists the possibility that staff could downplay the number of 'stressed loans' to make the books look better than they really are to management.

I now wish to expand my examination of 'stressed loans' to include the ANZ Bank as a whole. Banks work on International Standards to identify creditworthiness of loans. Unfortunately the most common international standard seems to be that each bank should set their own standard. The unfortunate consequence of that is that I have to introduce yet another definition of 'what is a stressed loan' for the ANZ Bank.

	UDC Finance Categories	Heartland Bank Categories	ANZ (Oz parent) Categories
Snoopy 'Stressed Loans'	Loan Categories 7 and 8 plus 'Default' loans less Provision for Credit Impairment. {Note: There is no loan category 9}	a/ Loans at least 90 days past due plus b/ Loans individually impaired . plus c/ Restructured assets. less d/ Provision for Impairment	a/ Loans past due but not impaired. plus b/ Loans restructured.

The guiding principle behind my definition of a 'stressed loan' is that such loans should not include loans or portions of loans already classified as impaired. In the case of ANZ, this is easy because the 'Impaired Loans' as shown in the ANZ Annual Report 2016 p114 are already shown as a separate and distinct loan category. So how does the five year picture for the 'stressed loan' position of the ANZ Bank unfold? And could we have used this picture to predict the capital raising of FY2015 before it was announced?


SNOOPY