The Commonwealth Bank has revealed its exposure to the bankrupt Lehman Brothers is less than $150 million, as Australian financial firms try to untie their links to crumbling US investment banks.
The ANZ and National Australia Bank also count among unsecured creditors of Lehman Brothers Holdings, which yesterday filed for bankruptcy protection.
ANZ, which announced provisions of about $1.2 billion for the second half, says its total exposure to the Lehman group of companies is around $US120 million ($149 million).
The exposure comprises a $US28 million exposure to Lehman Brothers Holdings and $US92 million to Lehman subsidiaries, the bank said in a statement.
"ANZ is not in a position at this time to provide an estimate of the likely loss, if any,'' it said, adding that Lehman subsidiaries are not part of the parent's Chapter 11 bankruptcy filing in the US yesterday.
"Lehman Brothers are also amongst 800 counterparties included in the underlying assets for ANZ's credit intermediation trades; their default has little impact on the level of first loss protection.''
Lehman Brothers' filing with the US Securities and Exchange Commission listed ANZ as having $85.3 million worth of exposures via two banks loans worth $54.4 million and $30.9 million.
National Australia Bank said in a statement today its exposure to Lehman and its subsidiaries is "less than $100 million, including any exposure held in conduits."
In Lehman's SEC filing, NAB is listed as having exposures of $28.3 million via two letters of credit worth $15.5 million and $12.7 million. The exposures are estimated as at July 2.
NAB jolted the market in July by citing $830 million in funds set aside for bad and doubtful debts. In recent weeks analysts have voiced concern the bank may have to make further provisions.
Westpac said in a release that it's exposure is less than $10 million.
While the reported loans are relatively minor, the main problem for financial firms will be coping with falling asset prices. Lehman Brother's will be trying to sell off its assets in a market already flooded by distressed sales.
"A significant fear is that asset sales in the bankruptcy liquidation of Lehman's or by a downgrading of AIG would invoke larger mark to market losses across the financial system threatening the solvency of more institutions,'' ABN Amro's director of foreign exchange Strategy, Greg Gibbs, wrote in a note to clients this morning, referring to fears about the insurer American International Group.
Local financial shares have dropped sharply today. ANZ shares were off 5.6% to $15.92 in midday trade, while NAB stock slumped 4.7% to $21.73 and Commonwealth Bank dropped 2.7% to $40.85.
Macquarie Group, the country's major investment bank, slid 7.4% to $36.54.
