Bank Examines Its Role In Securities Lending

Sydney Morning Herald

Tuesday April 8, 2008

Danny John and Colin Kruger

A WIDE review of ANZ's funding of the securities lending business has been ordered by chief executive Michael Smith after its exposure to the collapsed stockbroking firm Opes Prime came to light.

The review is being undertaken by Peter Hodgson, head of ANZ's institutional banking division, which has found itself with an increasing list of potential bad debts from its lending to the corporate sector, including another troubled broker, Tricom Equities.

Mr Hodgson's report is expected to land on Mr Smith's desk in a matter of weeks, if not days, as the bank struggles to come to grips with a blow-out in possible bad debts and sour loans.

ANZ is also battling the fallout from the damage to its reputation after it emerged that the bank had advanced about $650 million to Opes, which the broking firm then lent to its 1200 clients for them to buy shares in a range of ASX-listed companies.

Opes's failure subsequently led to ANZ, along with the broker's other lenders, Merrill Lynch and Dresdner Kleinwort, seizing control of $1.3 billion worth of shares that Opes had pledged as security for the money it had borrowed from the three institutions.

All three organisations have since been selling the stock in the market to recoup their loans. However, ANZ has shouldered more of the fallout, given its role as a major domestic bank lender, ending up with substantial stakes in 90 ASX companies. It took until yesterday to reveal the true size of its holdings.

Its stake in 11 of the companies exceeded the 20 per cent limit which technically obliges the bank to make a takeover bid.

ANZ's share portfolio, as of last Friday, included a 45 per cent stake in Austin Group and 43 per cent of Water Wheel Holdings, giving it effective control of the two companies.

The Australian Securities and Investments Commission has been talking to ANZ about disclosure of the stakes, but the securities regulator is not expected to take any action for now.

"We are indicating that there may be a need for ongoing disclosure," an ASIC spokesman, John Taylor, said. He said it was up to the Takeovers Panel to deal with the stakes which exceed takeover thresholds.

ANZ's Mr Smith sought to stem the tide of criticism yesterday by saying that ANZ would have still been supporting Opes had it not been for the "trading irregularities" that had forced the bank to appoint receivers to recover its loans after the company had gone into administration.

Today, all eyes will be focused on a series of creditor meetings in Melbourne for Opes Prime and some of its related companies.

The administrators, led by Ferrier Hodgson's John Lindholm, will give their first assessment of the financial state of the six companies in administration and are expected to recommend that the companies be placed in liquidation.

Gold turns to dust - Page 20

© 2008 Sydney Morning Herald

Back to News Index | Back to Home