Banks, managers reveal Lehman exposure

The four major banks and a number of listed investment groups have disclosed their exposure to the Lehman group of companies.

The Commonwealth Bank ofAustralia was the first to reveal its exposure to the Lehman group, in the realm of $150 million. Westpac followed suit with a smaller reported exposure of less than $10 million.

ANZ has stated that its total exposure to the Lehman group is approximately $152 million, comprising a more than $35 million exposure to Lehman Brothers Holdings and a close to $117 million exposure to Lehman subsidiaries.

“ANZ is not in a position at this time to provide an estimate of the likely loss, if any,” the bank’s statement to the Australian Securities Exchange (ASX) said.

The statement noted that the Lehman subsidiaries are not part of the Chapter 11 filing.

The National Australia Bank’s (NAB) statement to the ASX put its exposure to the Lehman group of companies at less than $100 million, “including any exposure held in conduits”.

Austock Equities Research today downgraded its forecasts for NAB due to the bank’s credit default swap (CDS) exposure. Austock reduced its forecast for the 2009 financial year earnings per share by 16 per cent — to $2.45 per share — “due to expectations of increased bad debt provisions against NAB’s corporate CDS”.

The forecast for the 2009 financial year dividend for the group has also been lowered to $1.90 per share for the same reason. Austock has maintained its ‘sell’ recommendation for NAB.

Bendigo and Adelaide Bank advised that it has no exposure to Lehman, Fannie Mae or Freddie Mac, or the troubled American International Group.

Meanwhile, a member of the Macquarie Bank Group — Generator Investments Australia — has reported that it holds Lehman stocks in its Generator Notes portfolio. A statement from Generator Investments said further information confirming the likely impact on the credit rating would be announced as soon as possible.

The Generator Notes portfolio was also exposed to Fannie Mae, but the group downplayed the possibility of any impact on the principal or income of Generator Notes.

The directors of listed investment company Mahogany Capital have requested a trading halt on the company’s Notes Series II until 10am Thursday, at which time they are expected to make an announcement.

The directors have called the trading halt to allow them time to evaluate the impact of the Lehman bankruptcy on distributions going forward and the ability to repay principal.

Lehman Brothers is also a reference entity in the capital portfolio for the Alpha Notes Series 1 offered by Alpha Financial Products.

“Although no credit event has been formally notified, the developments affecting Lehman Brothers are expected to result in a credit event in relation to the Capital Portfolio,” said director Tony Rumble.

The Capital Portfolio was also exposed to Freddie Mac and Fannie Mae.

The group said events concerning Lehman Brothers will not affect interest payments on the Alpha Notes Series 1 because Lehman Brothers is not included in the Income Portfolio.