ANZ boss warns banking ‘turmoil’ far from over

ANZ boss Shayne Elliott says the global market turmoil isn’t over with more people likely to be hurt by the fallout of rapidly rising interest rates.

ANZ chief executive Shayne Elliott says global financial turmoil could deepen with more people likely to be hurt by rapidly rising interest rates and banking sector volatility.

Mr Elliott told a business lunch in Brisbane yesterday that “uncertainty and risk profile” in the sector had increased following the collapse of Silicon Valley Bank and Credit Suisse’s shotgun sale.

Westpac said on Tuesday said that it had taken possession of about 200 homes after borrowers defaulted on payments. ANZ declined to reveal the level of defaults among its customers before it releases its half year results in May.

“It isn’t over and it is not going to go back to the way it was quickly,” said Mr Elliott. “The world is different when you’re living in a world with rising interest rates.

“To paraphrase a quote from a JP Morgan economist: when the Fed put the brakes on the economy, somebody always goes through the windscreen. And that certainly what’s happened when you have interest rates rising very fast. There is damage as a result of that. The regulators don’t set out to harm people but inevitably that happens.”

He said his view is that the current financial environment would take a long time to go through the economy. “So we should remain alert, not alarmed, and be a little bit more cautious and a bit more safety oriented as we enter the coming months,” he said.

“From where we sit today. I don’t think we’re heading for another huge crisis but that doesn’t mean there isn’t turmoil and that it won’t impact people.

Shayne Elliott

“In banking, we’re ultimately in the business of trust. Banks are 15 to 20 times levered and so you don’t need very much to go wrong to cause a problem. And so that’s why trust from your shareholders, which is the capital, but also depositors is so essential.”

ANZ has stepped into global markets to issue the first significant bank bond deal since the collapse of Silicon Valley Bank put a temporary freeze on global money markets.

ANZ has tapped Australian and Asian based investors for $4.25bn worth of funding, priced in Australian dollar terms. There were two bonds, $2.45bn of 3-year funding and $1.8bn of 5-year issue. The deal was oversubscribed with a combined $6bn worth of bids.

The bond issue was closely watched to see how well functioning money markets were, but traders said it represented a strong vote of confidence in the Australian banking system with the US and Europe facing a banking crisis.

Banks are expecting the cost of funding to be higher now compared to before the collapse of Silicon Valley bank and Credit Suisse’s sale.

Mr Elliott was more upbeat about the economic prospects for Queensland where ANZ is seeking regulatory approval for a $4.9 billion takeover of Suncorp Bank.

He said Queensland in the lead up to the 2032 Brisbane Olympics was going to require $1.3 trillion of private sector investment.

“That’s where we have a role to play,” said Mr Elliott. “We can help marshal the capital. We have the network in Asia and we are a major player in Queensland’s resources sector.”

He said ANZ was getting a “fair hearing” from regulators including the ACCC, which is expected to make decision on whether to approve the deal by June.

“We’re hoping to write a check for $4.9 billion soon to acquire an amazing team of people here and we’re really excited about that,” said Mr Elliott. “And, you know, part of our responsibility, it’s not just to run the bank but really shape a better world.”

The deal requires the ACCC’s green light to ensure it won’t substantially reduce competition across various markets, as well as approval from the federal and Queensland governments. State-based legislation would need to be changed to facilitate the takeover of Suncorp’s bank.

“The ACCC has got its job to do,” Mr Elliott said. “No doubt they will come out and ask more questions and that’s entirely appropriate. But we feel we can go in and answer all those questions. The sweetener we are offering is a $5bn platform and that is just the start.”

The marriage of UBS and Credit Suisse was hastily arranged to prevent a global financial meltdown

Originally published as ANZ boss warns banking ‘turmoil’ far from over