How refreshing. The chief executive of ANZ is “somewhat pissed off.” Aren’t we all, Mr Smith.
Makes you wonder if a little antipodean frankness might have gone down better with beleaguered investors in US banks, or in RBS say, following Tuesday’s monster writedowns and outsize cash call. Attempts to brazen it out have been received poorly by shareholders and the media.
Mike Smith was referring to the Australian bank’s backing of Opes Prime, the private client broker which collapsed last month and is now being investigated by the country’s regulator. ANZ, along with Merrill and Dresdner Kleinwort, were Opes’s largest secured creditors and are now owed more than A$1.2bn.
The chief executive, who joined in 2007, has the advantage of being new enough not to have had a hand in decisions related to Opes. He also, announcing a 7 per cent fall in interim profit, is in a position to maintain that the financial hit to the bank is slight, albeit with a more severe reputational blow. But still, you know you’re in Australia when you get this kind of straight-talking.
The position is very unpleasant, and I have to say I’m somewhat pissed off about the whole thing.
And this kind of no-frills analysis.
The question to ask is: ‘Should ANZ have been in this kind of business?’ Quite clearly not.
The sentiment is pretty much what it took UBS 50 pages to convey earlier this week, as they considered their ill-fated accumulation of super-senior tranches of CDOs. Felix Salmon has been considering their mea culpa. As has David Murphy.
Because in Switzerland, they instead put it like this:
Amplified Mortgage Portfolio (“AMPS”) Super Seniors: these were Super Senior positions where the risk of loss was initially hedged through the purchase of protection on a proportion of the nominal position (typically between 2% and 4% though sometimes more). This level of hedging was based on statistical analyses of historical price movements that indicated that such protection was sufficient to protect UBS from any losses on the position. Much of the AMPS protection has now been exhausted, leaving UBS exposed to write-downs on losses to the extent they exceed the protection purchased. As at the end of 2007, losses on these trades contributed approximately 63% of total Super Senior losses.
Related links
Opes fall prompts ANZ review – FT.com
Broker’s demise is an Australian tragedy – FT.com