Business Stress Report
Download a copy of the Business Stress Report (March 2012) by clicking here.
The Dissolve Business Stress Report is a quarterly analysis of business failures in corporate Australia. The Report measures the number of company insolvencies, the cost of insolvencies to Australian Banks and provides a state-by-state analysis.
Key Factual Findings
The overall trend has been that during the GFC the number of corporate insolvencies increased somewhat with the cost of those insolvencies increasing dramatically. Post GFC, both the cost and number of insolvencies dropped from their peaks but remained well above pre-GFC levels. In 2011 the number of insolvency appointments trended back up to new highs with the cost of those appointments remaining at over double pre GFC levels. All indications show that 2012 will follow that trend, with January 2012 setting a record high over previous Januaries.
Key findings of the latest Business Stress Report are as follows:
- The quarterly cost of All Bank New Asset Impairment Charges (or “Bad Debts”) for Australian Banks in the Quarter to December 2011 is $5.4 billion. That is an increase on the September quarter, which was $4.9 billion, and well above the average pre-GFC level of $1.1 billion.
- The number of companies entering some form of insolvency administration continues to set new records. Six months in 2011 were the highest ever for each of those months. The calendar year 2011 was also the highest ever. January 2012 continues this trend with 518 insolvency appointments being the highest January on record.
- In the year to January 2012 there were 1,386 appointments by Secured Creditors, which will be predominantly Banks appointing Receivers. Again that is the highest number on record.
- An analysis on a state-by-state basis reveals significant deterioration in some states when comparing January 2012 to the previous 5 Januaries with Tasmania leading (up 58%) and Queensland (up 39%). There is a more moderate increase in insolvencies for Victoria (up 25%), South Australia (up 25%) and South Australia (up 32%). New South Wales is only up 12%.
Our Comments
2012 looks like it is going to follow 2011’s trend of record insolvency numbers. 2011 was a record year and 6 individual months set new highs for the number of insolvency appointments. We can now add January 2012 to the list of records as it’s 518 insolvency appointments are the highest ever recorded for a January.
The cost of Insolvencies (All Bank New Asset Impairment Charges) have plateaued after a slow decline from their peak at $11.4 billion in the June 2009 quarter. However the $5.4 billion figure from the quarter to December 2011 is only “less bad” when compared to the pre GST average of $1.1 billion.
In terms of comparison, banks in the UK have just written £5.1 billion of corporate debt, a record quarter for them. Whilst the Australian figure is all bank debt
(personal and corporate) this shows Australian banks are still reporting huge levels of bad debt on an international scale.
