Case Study
ASSET QUALITY & LOSSES
Asset Quality:
Key Learnings
• Stricter lending criteria can reduce losses but can limit growth
• Changes to risk settings take time to transform the customer base
• Better quality loans can provide a release of capital
• Risk should be priced appropriately using a “through the cycle” view
Asset Quality Matters
24 April 2012
Brian Johnson, Jeffries
Asset Quality Impacts On Profits
Drivers of Losses
30 October 2018
Shayne Elliott – ANZ CEO
Drivers Of Bank Losses
Historical Context: Losses
September 2016
Platinum Asset Managers
Australian Bank Losses – Historical Context
Profits Highly Sensitive To Losses
Assume a Bank comparable to CBA / Westpac…
Bps = basis point
Australian Bank Losses (%*)
Losses can be very volatile
*Losses as % of Gross Loans
Australian Bank Losses ($m)
5 Years Pre-Crisis vs. 5 Years Post-Crisis
Losses can easily destroy billions in shareholder value
Summary
• Stricter lending criteria can reduce losses but can limit growth
• Changes to risk settings take time to transform the customer base
• Better quality loans can provide a release of capital
• Risk should be priced appropriately using a “through the cycle” view
