The ANZ has made provision for a debt of $A1.2 billion ($NZ1.56 billion) for the second half of the year.
The provision by the ANZ, which also owns the National Bank, follows last week's announcement by the National Australia Bank, which owns the Bank of New Zealand, of a similar provision for a $A830 million debt because of its exposure to the US home mortgage market, prompting its stock to decline more than 10%.
Despite the Reserve Bank of New Zealand having last week lowered the interest-driving official cash rate to 8% for the first time in a year, the increasing debt incurred by banks from the US subprime mortgage crisis and subsequent global credit crunch means bank interest rates may be held higher, for longer.
ANZ shares were down 12% during trading yesterday at $20.25.
In April, ABN Amro Craigs downgraded the seven major Australian banks, forecasting an almost 10% decline in earnings because of the increasing cost of global borrowing, with lending growth declining from 25% to 5%.
Australian Treasurer Wayne Swan said yesterday the ANZ announcement revealed the country was not immune to developments in global financial markets.
"I think we shouldn't lose sight of the fact that we do have a strong, well-regulated banking sector which is capable of withstanding the fallout from these international developments," Mr Swan told AAP news service.
ABN broker Peter McIntyre said although ANZ profit was forecast to be up 8%, before debt provisioning, if the $1.56 billion debt provisioning proved correct its profit would slump 25%.
"It may be the provision [statement] is more aggressive than necessary; it will be a case of waiting and seeing," he said.
Dividends for the full year would be unaffected at $1.36 but earnings per share were forecast to be down 20%-25%.
Mortgage rates were likely to stay at today's levels or go up as banks found it increasingly difficult to raise money overseas and he said because all banks "were in the same [borrowing] boat" it was likely interest rates on term deposits would fall, Mr McIntyre said.
ANZ National chief executive Graham Hodges told NZPA the ANZ National bank still expected to make a billion-dollar-plus profit in New Zealand this fiscal year, despite the parent having announced the $A1.2 billion bad debt provision.
ANZ National made a $NZ610 million bottom-line profit in New Zealand in the six months to March 31, up 7% on the corresponding period last year, which included a one-off sale of a Visa business.
The bank generally aimed to increase annual profits in New Zealand by 8% to 10% "and we won't achieve that", Mr Hodges said.
Mr Swan said the ANZ's announcement was a result of bad investment decisions made years ago and volatility on global markets.
He was not expecting other banks to make similar statements and he was satisfied all banks had made full disclosure and the disclosure system was working.
