ANZ to pass on 'as much cut as it can'

ANZ Banking Group Ltd's Australian operations chief pledged the bank would pass on as much of an expected official rate cut as it could, while pointing to the "unbelievable volatility" in global credit markets.

The Reserve Bank of Australia is next Tuesday expected to lower the official seven
per cent cash rate, perhaps by up to half a percentage point.
"We intend to pass on what we can," Brian Hartzer said, adding the degree of any cut
by the bank was dependent on the level of wholesale funding costs.
Mr Hartzer said the cost of funding for banks had escalated last week to 100 basis
points above the 90-day bank bill and on Thursday was standing at 70 basis points
over.
"Banks have lost so much faith in each other that the interest rate spread banks are
seeking to lend to each other is at a near all-time high," he told an American
Chamber of Commerce in Australia function in Melbourne.
Mr Hartzer said there was "unbelievable fear in offshore markets" related to credit,
which had made it difficult for the bank to source short term funding.
"We are seeing the most unbelievable amount of volatility in the overseas markets we
have ever seen...That has a material impact on our ability to raise funding," he
said.
If the difficulties continued, it would flow on to credit lending in Australia.
Mr Hartzer said the Australian economy was in good shape.
However, due to the nation's large current account deficit - which stood at $12.774
billion in the June quarter - Australian banks have to borrow significant amounts
of funds offshore.
Separately, on the issue of people management, Mr Hartzer said it was important to
"make sure you have the right people in the right roles and if you don't, make the
tough decisions, now" as a way of future-proofing an organisation in difficult
times.
Last month, Mr Hartzer was a winner in the first phase of a four month restructure
by the bank when he was elevated to the newly-created role of chief executive
officer Australia.
ANZ has said it would cut several hundred middle and senior level management
positions by the end of calendar 2008, reversing a rapid expansion in headcount made
in recent years.
Mr Hartzer also targeted the Australian government's four-pillars policy, which bars
the big four banks from merging with each other, saying that if Australian banks
wanted to remain competitive on the global scene, then industry restrictions would
need to be reviewed.
"We are seeing very rapid consolidation offshore and so on a relative basis
Australian banks are starting to look small," he said.
Meanwhile, ANZ also said it will not tap into the US government's proposed $US700
billion ($A840 billion) rescue fund, to curb possible losses from its $5.5 million
conduit portfolio.
"We have no plan for any claims with respect to the proposed US stabilisation
package," an ANZ spokeswoman said.
ANZ's total exposure to collateralised debt obligations (CDOs) was $5.5 million in
2007 and has not changed, she said.
The CDOs are not mortgage related and are not a material issue for ANZ, she added.
ANZ has AA-rated CDOs worth $3 million, AA- CDOs worth $1 million and BBB+ CDOs
worth $1.5 million.
The bank's comment came after brokers said the bank's shares were performing below
its peers on market fears of further writedowns from the conduit portfolio.
Shares in ANZ fell 32 cents to $18.98.