ANZ says Asian exposure will decrease over time

ANZ says Asian exposure will decrease over time

SYDNEY (Reuters): Australia and New Zealand Banking Group Ltd (ANZ), the Australian bank most exposed to Asian lending, said yesterday it expected its exposure to the economically troubled region to drift downwards over time.

ANZ chief executive John McFarlane told the Nine Network's Business Sunday program the bank's previous exposure to Asia of over US$11 billion had been too high.

ANZ said last month it had cut its exposure to Asia 38 percent over the six months to March 31 to $7.13 billion from $11.51 billion.

"For a bank of our size the level of exposure we had to Asia of just over $11 billion was just too much and it wasn't in product areas that were strategic to us," McFarlane said.

"The optics of that number were quite damaging to our share price...by reducing the aggregate exposure we mitigated terminal risk, even though it had such a low probability," he said.

ANZ did not see its total Asian exposure rising again, McFarlane said.

"I would never anticipate our aggregate exposure levels to increase from the current levels," he said.

"Having said that, the balance of them are likely to change. There'll be more trade finance. Much more priority on customer transactions and less market type transactions."

"I think the exposure will drift downwards from where it is."

ANZ's exposure to the Asian economies hardest hit by the economic turmoil, including Indonesia, Korea, Thailand, Malaysia and Vietnam, fell 24 percent in the six months to March 31 to $2.42 billion.

ANZ's exposure in Indonesia fell 26 percent to $603 million over the six months.

McFarlane said about $150 million of that exposure was of "very, very low risk."

Earlier this week ANZ reported its first half net profit rose eight percent to A$625 million, despite A$159 million in provisions for doubtful debts in Asia.

McFarlane repeated comments made earlier in the week that the Asian losses would not boost the group's total doubtful debt provisions beyond A$500 million for the full year to September 30.