Interviewed by Tony Boyd of Business Spectator.
Tony Boyd: Cameron, it's the first time I think in about a year that you haven't used the word 'solid' to describe the bank's performance. I think you've said that conditions are tough, but the message is they're going to get worse. Is that right?
Cameron Clyne: Well, I think, Tony, what we're now experiencing is an economic deterioration. We've seen it come through in this half, where the number of bad and doubtful debts attributable to the business sector has increased. We've seen, I think, a number of economic projections this half regarding GDP and unemployment, which are worse, so our result is really a reflection of the more difficult economic environment we're facing.
TB: Could you talk about bad debts generally? What are they likely to be in the second half of this year?
CC: Well, it's difficult to predict. What we're really flagging is that probably in 2008, the impairments were more restricted to large corporate exposures and they were really a function of corporates that had highly leveraged business models. I think what we're seeing now is the business sector, as confidence deteriorates, the small to medium business sectors start to experience some economic stress and we're really flagging these unemployment peaks in 2010.
That's when you'll start to see the consumer defaults rise, so I think it's just playing out as many economic cycles have, as you move through those various sectors. It's difficult to determine, whether we're at the peak or we're starting to flatten with an outlook going forward, but we certainly are seeing most of the economic statistics deteriorate.
TB: And your operations in the UK, the bad debts there really jumped quite sharply in the latest half. What's the outlook in the UK?
CC: Well, the UK is obviously an economy that really went into economic decline first and therefore has been in decline for some time, so they're probably at a more advanced point relative to Australia. You can't necessarily draw parallels, because our bank in the UK and our bank in Australia have different market positions and different business mixes, but it's it's clearly a challenging market there. One thing we do take some degree of comfort from is that we've got an experienced management team there that know and understand that market and what we also have there is a business, I think, that's been weathering the issues there for about 18 months and they do have battle scars around managing through this decline and outperforming its peers as well So, a difficult market, but we're as well positioned as we think we can be.
TB: You injected £700 million into that business after a stress test by the FSA. Will it need more capital over there?
CC: We don't see that as being an outcome at this point in time, because as I said, it maintains almost all of its funding in its own right, either through customer or other issuance under its