Bad News Continues in 2012 – Business Stress Report

Every quarter here at Dissolve we break down the most telling corporate insolvency, liquidation and restructuring statistics into our Business Stress Report. Our latest report reveals that the bad news for corporate Australia is continuing into 2012.  January 2012 is another record high month for the number of corporate insolvencies and the cost of those insolvencies continues to run at over four times pre-GFC levels. You can download the full Report here and I’ve given a summary below.

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. That is an increase of 13% over the previous January and 19% over the average of the previous five Januaries.

• 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%.

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 settled off their peak of $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 GFC 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.