News Keeps Getting Worse For Anz

Sydney Morning Herald

Tuesday May 20, 2008

Edited by Colin Kruger

This time a New Zealand offshoot is taxing the bank, its latest accounts reveal.

SETBACKS tend to come in threes, so perhaps it's no surprise that ANZ Bank should be find itself labouring under yet another financial dead weight.

After an increase of almost $1 billion in half-year provisions caused by soaring bad debts - this is on top of the Opes Prime fiasco - comes updated news of a tax problem faced by the bank's New Zealand subsidiary, National Bank.

The bank has been at odds with the tax authorities over various structured finance deals dating back over a five-year period from 2005.

The National's half-year accounts to the end of March, which were filed with the ASX yesterday, show that New Zealand's Inland Revenue Department has widened its inquiry to cover other deals undertaken by the local bank.

ANZ puts the maximum tax liability of these transactions at $NZ365 million ($296 million), or $NZ523 million with interest.

If ANZ ends up with the whole bill, it will be able to offload $NZ99 million (or $NZ147 million with interest) to the British bank Lloyds TSB, from which it bought the group just over four years ago.

But that will still leave it with a potential liability of $NZ266 million - or $NZ376 million if you count in the added tax.

The dispute is still at an early stage and ANZ emphasises that there is no liability as yet.

Fees fine

The $2.5 billion initial public offering of the ammonia producer Burrup Holdings should give the top end of town some hope the worst days of the credit crunch are behind them.

Fees of up to $15.5 million are being shared by the lead manager UBS and co-lead Macquarie Group. Ernst & Young also picked up $3.5 million as corporate adviser.

On a separate matter, we couldn't help but note that ANZ transacted a $US75 million ($78.5 million) "share mortgage" with a trust associated with Burrup's founder, Pankaj Oswal. The mortgage covers 15 per cent of Burrup's issued stock. We were assured the stake is not subject to margin calls.

Assets look big

The battle over whether BHP Billiton or Rio Tinto has a superior asset portfolio has shifted to copper.

Rio has announced a large resource upgrade at its Bingham Canyon operation in Utah, giving the mine an extra 3 million tonnes of contained copper underneath the current open pit.

During an analyst site visit on Friday, Rio's copper chief executive, Bret Clayton, noted his company had a higher copper business margin than all of its main competitors, including BHP.

He also noted that the copper market remained strong because mines and expansions - including BHP's Olympic Dam project - were expected to come on stream much later than initially expected.

But last week BHP's chief commercial officer, Alberto Calderon, noted his company had relatively fewer greenfield - completely new - development projects compared to Rio, and therefore less execution risk in its copper growth portfolio.

Leaving on a high

Macquarie Group's year-end result today will attract greater interest than usual, not least for the fact that it marks the end of Allan Moss's 15-year reign as chief executive and the elevation of Nicholas Moore as his successor.

Moss is expected to go out on a high after revealing another record annual profit, thought to be about $1.82 billion.

This year, the consensus earnings figure among analysts ranges across a fair spread - from $1.77 billion at the low end to $1.89 billion at the top.

That is because the likes of Credit Suisse reckon Macquarie may have to take a hit of as much as $250 million to cover a write-down of its real estate investment trust interests.

That's not so much of a surprise given the state of the property world (think Allco Finance Group's troubled Rubicon offshoots here) but it will still be a blow to Macquarie's pride, especially as it has been seen to be relatively bullet-proof over the past few credit-crunch months.

Centro sales close

Centro's bankers could finally receive some much-needed cash from the debt-stricken retail landlord, amid suggestions the group is in serious talks with potential buyers for 10 of the 25 shopping centres it has officially put up for sale.

Would-be buyers are said to be offering book value and even more in some cases for the better-quality sites, which is a relief for the financiers, who had feared the weakening debt market and flagging consumer sales could trigger a fire sale.

Comfortable ride

Inadequate government services can be a boon for a private-sector monopoly. Take Cabcharge. The company's Westbus joint venture is reaping rewards from the State Government's neglect of public transport in Sydney's outer suburbs.

Westbus last week reported a 26 per cent quarterly increase in turnover from last year, and a 45 per cent increase in earnings before interest and tax.

Credit Suisse yesterday said that with government transport unable to meet exploding demand in western Sydney, the business would continue to generate double-digit earnings growth. It also provides Cabcharge with a second earnings silo with high barriers to entry. The first, of course, is Cabcharge's quasi-monopoly on taxi payments.

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