Business Stress Report – 2012 in Review

Dissolve combines liquidation and restructuring statistics into our quarterly Business Stress Report. Our latest report reviews corporate insolvency in 2012. You can download the full Report here and I’ve given a summary below.

2012 has surpassed 2011 to be the highest calendar year on record for company insolvency appointments with 10,632 appointments. The cost of those appointments (represented by All Bank New Asset Impairment Charges) in 2012 of $20.3 billion, continued the decrease from it’s peak  of $36.2 billion during the GFC. However the decrease from 2011 to 2012 has slowed to only 4%. It was also a record year for insolvencies in Queensland with 2,298 appointments, representing a 12% increase over 2011 and a 36% increase over the average of the previous 5 years.

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 September 2012 is $5.42 billion.  That is an increase over the previous quarter, which was $4.46 billion, and still well above the average pre-GFC level of $1.1 billion.
• The number of companies entering some form of insolvency administration in the year to December 2012 was 10,632. This was a 1% increase over the prior year and a 15% increase over the average of the previous 5 years.
• There are indicators that the number of insolvencies has peaked and is starting to decline—of the last five months of the year, four showed a decrease in insolvency appointments when compared to the  same month in 2011. The largest decrease was 11% in September.
• In the year to December 2012 the most common type of insolvency appointment was a Creditor’s Voluntary Liquidation (voluntary liquidation initiated by a company director) with 4,947 appointments comprising  47% of all appointments for the year.
• In 2012 Queensland  and Tasmania showed the largest change, increasing 36% and 67% respectively when compared to the average of the previous five years. The raw number for Tasmania was quite low at 105. Queensland saw it’s highest yearly number on record in 2012 with 2,049 appointments, making up 22% of the national total.

If indeed the number of insolvencies has peaked, that would be on par with my prediction from a few years ago.  Back then I noted that after the last big crash in October 1987, insolvency numbers peaked after four years.  This time, if we count mid-2008 as the start of the crash, then the peak in mid-2012 is right on schedule.