The Indianpost

Global economy fragile warns ANZ chief

His comments came after ANZ reported a $1.4 billion underlying profit for the third quarter, up 1.3 per cent, to round out trading updates and results from the major Australian banks.

In a briefing to analysts, Mr Smith there was a risk that “policy missteps” from European and US political leaders could create a major systemic event for financial markets.

“I’ve been saying for some time that the vulnerabilities that built up in the world economy prior to the financial crisis would take time to work through,” Mr Smith said.

“Europe is a mess with quite genuine concerns about the solvency of countries like Greece, Ireland and Portugal and now there is the contagion effect which is a challenge for Italy and for Spain.

“In the US, which I’m normally much more optimistic about, we’ve seen a crisis created by the partisan nature of its current politics and that’s created further concern to what was already a fragile recovery.”

Shares in ANZ fell as much as 5.6 per cent in early trading after sharp falls in European and US stockmarkets on fears global economic growth could slow sharply.

By late morning, ANZ was down 88 cents, or 4.3 per cent, to $19.54 against a 2.7 per cent decline in the benchmark S&P/ASX 200 index.

Mr Smith said the global recovery was reliant on Europe and US showing signs of stability.

“Further mis-steps from European and US policymakers risk converting the cracks in their economies into a much deeper global system crisis which would have worrying economic and
social consequences,” he warned

The update showed ANZ had taken a major hit on its trading book, with that revenue in that business down 14 per cent.

Mr Smith said he had ordered the trading business to become more “neutral” in its positions to ride out the current volatility.

He rejected recent speculation that the bank took a big hit earlier this month because its traders had been positioned for the Reserve Bank of Australia to raise official interest rates, based on the forecasts of ANZ economists.

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