UPDATE 1-CBA admits exposure to failed Aussie corporate
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SYDNEY, Nov 7 (Reuters) - Australian banks' exposure to two failed local corporates has increased to at least A$1.6 billion ($1.08 billion) and is likely to add to pressure on the banks to raise more capital in the near-term.
Commonwealth Bank of Australia Ltd (CBA.AX) (CBA) was the latest bank to release on Friday details of its exposure to childcare group ABC Learning Centres Ltd ABS.AX, which this week surrendered control over the company to its creditors.
CBA put its total exposure at A$690 million, including A$240 million in senior debt and about A$450 million in hybrid notes after writedowns on the hybrids were revised up.
The banks' disclosures follow the collapse this week of ABC and investment firm Allco Finance Group Ltd AFG.AX after both failed to refinance their debts in the face of the global credit crisis.
Australian banks have so far largely weathered the subprime mortgage crisis and global credit squeeze without too many major problems, unlike their peers in the United States and Europe.
But with growing signs of a global recession, even Australian banks will be forced to restructure their businesses and raise more capital, according to analysts.
"We expect continuing cyclical downside earnings from the deteriorating environment and then significant restructuring headwinds regarding capital as well as growth prospects," ABN AMRO Banking Analyst Jarrod Martin said.
He expects banks to raise capital in all forms, including dividend reinvestment plans, hybrid capital and equity.
The number of Australian firms grappling with debt problems is growing, putting pressure on the country's top banks.
In addition to Allco and ABC, shopping mall owner Centro Properties (CNP.AX) and investment fund Babcock & Brown BNB.AX are struggling to refinance debt, following years of heavy reliance on cheap debt for funding.
For details on Australia's other major banks exposure, double click on [ID:nSYD144861]. ($1=A$1.50) (Reporting by Cecile Lefort and Denny Thomas; Editing by James Thornhill)
