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Big banks face $5.5b risky debt exposure
Email Print Normal font Large font AdvertisementDanny John
February 15, 2008

THE country's leading banks are thought to have an exposure of almost $5.5 billion to five of the most debt-laden and financially troubled companies, in a sign of the growing pressures corporate borrowers are placing on lenders.

With the Commonwealth Bank still reeling from the market's reaction to the impact of increased bad debt provisions on its first-half profits, new estimates from industry analysts underlined the fallout from a potential loan failure by one or more of the prominent businesses.

The list includes Centro Property Group, which will unveil a short-term financing lifeline from its banks today, the fund manager MFS, the US mortgage lender Countrywide Financial, the investment combine Allco Finance and its offshoot Allco Principals Trust.

Of the $5.45 billion lent to those companies, Commonwealth has provided the most money, $1.7 billion.

National Australia Bank is next in line at $1.6 billion, followed by ANZ ($1.35 billion), St George ($500 million) and Westpac ($300 million), research by the brokers UBS shows.

While the list does not imply either a loss by the banks or a default by the companies, it nonetheless indicates the size of debt problems facing the lenders, having seen what were considered to be financially strong borrowers suddenly crumble in the face of the global credit crisis.

Australian and international banks have lent a total of $9.6 billion to the five companies involved, of which the biggest sum, $6 billion, is owed by Centro, Australia's second-largest shopping centre owner.