Business Stress Report October 2012

Dissolve combines liquidation and restructuring statistics into our quarterly Business Stress Report. Our latest report reveals that the trend of record insolvency numbers may be starting to slow.  June and August 2012 recorded a decrease in insolvencies when compared to the corresponding month in 2011, and July whilst still a record high for that month was only a 1% increase over July 2011. The cost of those insolvencies hit the lowest point since the GFC, but is still 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 March 2012 is $4.46 billion.  That is a decrease from the March quarter, which was $5.14 billion, and well above the average pre-GFC level of $1.1 billion.
• The number of companies entering some form of insolvency administration in August 2012 was 996. That is a decrease of 5.1% from the previous August but an increase of 20% over the average of the previous five Augusts.
• Insolvency numbers remain high in Queensland. For the month of May 2012 there were 206 appointments in Queensland making up 21% of the national total. Whilst the raw number is down from recent record months for them, the 2012 calendar year is up 60% when comparing to the average of the same period over the previous five years.

Early 2012 continued the trend from 2011 of record insolvency numbers. However the quarter to August 2012 is showing that trends may be starting to slow. June and Augusts’ numbers came in below their corresponding months last year. However it should be noted that both months were respective record highs in 2011, so whilst it may look like things are turning around for corporate Australia, things are really only looking “less bad”.

The cost of Insolvencies (All Bank New Asset Impairment Charges) has also dropped this quarter to $4.46 billion, it was the lowest quarter recorded since the GFC. We feel this number understates the true cost of insolvencies as Banks continue to drip feed their distressed physical assets, such as commercial properties, to the market.

However the $4.46 billion figure for the quarter to Jun 2012 is still four times higher than the pre GFC average of $1.1 billion.