Tuesday, September 16, 2008

ANZ Bank Risk

Now let's think about the financial condition at ANZ, who currently holds no more than $4billion in reserves. They own 50% of ING, therefore liable for roughly half the losses. Of the two credit funds (Regular Income Fund, Diversified Yield Fund, withdrawals frozen since Mar 08), realistic losses should stand at roughly 90%.

That would not be so bad, if unleveraged, as the original investment prospectus suggested a goal of roughly 10% return per annum, it suggests their gains/losses probably stood somewhere around 300% to500% of market performance. In this case, it means they've lost about 270% to 450% of investors' capital. Each fund held roughly $500m, and being liable for half the damages, ANZ lost at least $1.5 billion off those two funds alone (other losses are mounting).

Excessive Credit Risk

ANZ has sold about $23 billion worth of CDS, guaranteeing against practically junk status credit instruments. Simply put, more defaults will come from the now begun credit contraction, and ANZ will not be able to handle all the write downs. If you're a customer of the bank, it would be high risk to leave the bulk of your wealth there.

0 Reflections: