Salomon positive on Australian bank asset quality
(Australia) - Investment house Salomon Smith Barney remains "cautiously optimistic" on the asset quality of Australian banks despite the problem emerging as the "bogey" for bank share prices.
In a report released this week SSB says ANZ's recent exposure to Marconi has caused concern among investors about bank credit quality, with so called "investment grade" credits the specific area of concern.
"We maintain that mortgage lending exposure remains low risk, providing Australian banks with a positive point of differentiation from banks globally," the SSB report says.
Although confident about the risk profile of mortgages, SSB says Australian banks can expect a pick up in bad debts in the personal lending area.
The health of the economy and low levels of gearing are expected to prevent a blowout in bad debts among small and medium sized enterprises.
SSB notes that the majority of recent problem loans have come through large institutional banking exposures, and warns investors to be careful.
"Clearly investors must be careful not to assume that investment grade credits are just that," the SSB report says.
"We maintain that mortgage lending exposure remains low risk, providing Australian banks with a positive point of differentiation from banks globally," the SSB report says.
Although confident about the risk profile of mortgages, SSB says Australian banks can expect a pick up in bad debts in the personal lending area.
The health of the economy and low levels of gearing are expected to prevent a blowout in bad debts among small and medium sized enterprises.
SSB notes that the majority of recent problem loans have come through large institutional banking exposures, and warns investors to be careful.
"Clearly investors must be careful not to assume that investment grade credits are just that," the SSB report says.
Subscribe