The Impact of a Global Issue on an ANZ National Bank - Essay Example

Globalisation and Business Enterprise Table of Contents Table of Contents 2 Introduction 3 ANZ National Bank 3 Global Recession 4 Impact of a Global Issue on a ANZ Bank and Wider Society 4 Conclusion 8 References 9 Introduction In the discussion of impact of a global issue on a New Zealand company and wider society, ANZ National Bank Limited is chosen as the company and global recession is taken as the global issue. The global recession has had an impact through out the world. It has impacted almost all business set ups, ranging from the small retail store to large multinational corporations. ANZ National Bank ANZ National Bank Limited is considered as New Zealand’s one of the foremost banking and financial service providing group. The headquarters of the bank is at Wellington in New Zealand. Around one million people of the country bank with ANZ. ANZ has on offer a wide range of financial related products and also services. The bank has a global presence. The bank has branches in Asia, United Kingdom, Europe, the Pacific region, and also in the United States. It is considered as one among world’s 100 largest banking organizations. Global Recession Global recession is said to be a period of time when global economy slows down considerably. In the recent times, the world economy entered into recession since the year of 2008. Due to crisis occurring because of sub-prime scenario the trade of both goods and assets decreased throughout the world. Business cycle related correlation had increased during the sub-prime crisis. Due to this trade of goods as well as GDP relative financial openness also increased. But the needed change in allocation of this goods and trade was not properly correlated with the shifting of the business cycle synchronization. Due to this scenario through out the world the global economic has seen a severe decline and for this reason the world’s financial situation has been affected in almost every sector (Imbs, 2009). Impact of a Global Issue on a ANZ Bank and Wider Society ANZ National Bank in New Zealand has an omnipotent presence in the lives of people of the country. It has touched their lives through a wide range of scenario. It is one of the highest profit and asset making companies of the country. They have around 9,000 employees in the bank through out the country. The bank is a financial source for home loans. It also generates Gross Domestic Product (GDP) for the country’s economy. It has associated itself with charitable events and also other events of sponsorship (ANZ National Bank Limited, 2010). In the present day, globalization has changed the way business is done. It has made business organizations to think of global trade and potential of growth in the overseas market. It is considered that global trade has a possibility of changing the standard of living of people by improving the qualitative aspects of their lives. The benefit of global trade is not being equally distributed among all the people. Globalization has brought with increasing rate of financial and economic volatility. The poor economies are being affected on a greater scale. Due to the openness in global trade, the rich nations try to limit the share of poorer nations. They use high tax rates on the goods imported as strategic tool to overpower poorer economies. Recession had a major impact on ANZ bank. The global credit crunch and also the domestic recession had a major influence on the business related performance in the year 2008 for the bank. Profit after tax has decreased to around $ 600 million i.e. a decrease of around 17 % and resulted in the devaluation of the New Zealand Dollar (Australia and New Zealand banking group limited-New Zealand Branch, January 2009). In the current financial year, the bank’s profit amount is calculated a $386 million, a decline from its earlier year’s figure of $421 million. The economy of the country is presently has become more stable after the volatility of the recession period. The recovery though is considered as uneven (Sharechat, 2010). The financial crisis has made the bank face a substantial amount of bad debt and also accruing of costs that had emerged because of tax related disagreement along with the Inland Revenue. In early stages of the recession period the banks had a credible performance. The resulting decline was at modest and expected rate. But in the second half of 2009 the results showed a significant loss. The amount of bad debt increased because of the impact from commercial sector. The recession made the commercial sectors to increase their loan amount from the bank. This made the bank suffer huge amount of financial bad debt. Lowering of net interest income has made the impact on the bank. The lowering of interest rates had reduced interest expenses and interest income. The interest income rates had forced the banks to have a reduced income from the financial sources. The bank has relied greater amount on wholesale market for the funding of the banks operations. It also impacted on the banks liquidity profile. This funding is considered as expensive in nature, so it was not able to attract more funding from international sources. In order to attract them, the bank required to maintain their credit rating by the help strong support from the country’s economy and also stable financial performance (Price Waterhouse Coopers, 2010). The revenue growth and provisions are affected by the global recession. The partner of joint venture, ING had to settle two frozen funds which impacted the bank an amount of NZD116 million after the tax. This has made the bank to reduce their statutory profit by the amount. The overall profit for all the business areas has reduced by 31 % as compared to the beginning of the recession period. Profit before the credit related impairment and also the income tax has subsided to 6 %. The provision facility has been impacted by the recession situation. The retail sector had to face the credit crisis the most. Commercial businesses though gained reasonable amount of growth in their profit because of contributions from rural business units. This has impacted positively on the balance sheet. The provision charges for individuals have increased from their low levels of the beginning of the recession period. The domestic recession impacted the provisions in the middle stages of 2008. The weakness in the consumer sector had caused the retail sector increase in the provisions. Consumer guided impact of the recession is felt in the business related markets. The impact forced an increase in non accrual loan for various business units. The impact of the recession hit the economies of the country severely. This has made an impact on the banks overall profit during the recession period. The ANZ New Zealand’s profit slumped to an amount of more than 30 % due to recession (Australia and New Zealand banking group limited - New Zealand Branch, August 2009). Global recession has made a deep impact on all the nations through out the world. It has impacted on both developed and developing nations. The wider society also faced the impact of the crisis. In the global economy the recession, brought in increase of food prices and also unprecedented increase of fuel prices. The global financial markets collapsed due to the decrease of economic demand through out the world. The global economical growth was reduced by a significant margin. In one of the worst after effect of the economic crises, the Lehmann Brothers became bankrupt (due to the recession). It impacted tremendously on the lives of the people working in the company. In New Zealand also the impact was severe. The pacific region along with Australia and New Zealand are considered one of the most picturesque tourist destinations of the world. The tourist brings in lots of foreign currency in the country which helps in boosting the country’s economy. It also helps in earning livelihood of people who are directly impacted by tourism like hotels, tourist guides, and tourist cars owners. The global recession had impacted on the frequency of the visit to the beautiful locations of New Zealand. It impacted on the lives of people as well as on the economy. The workers of New Zealand also felt the brunt of the economic crisis. It caused the unemployment index to rise sharply during the recession. The unemployment scenario had also affected the women population of the country. It forced them to work on a part time basis. The scenario had a direct impact on the purchasing power of the people due to lack of money and resulted in the reduction of the amount of income of an individual and increased poverty. The impact affected the economy of the country by a considerable extent. Conclusion New Zealand as a country is fast recovering from the recession due to its demand in ever growing Asian marketplace and also the strong Australian economic scenario. The flexibility of exchange rate has also helped the country to start their recovery. High external and also household debts had caused a crisis in the banking sector of the country. This recovery in economy has also impacted positively on the lives of the people in the society by increasing their spending power which in turn affects the economic scenario. Some other reforms like that of core funding will help the banks reduce their over reliance on external funding on a short term basis. All of this will help the economy to tide over the crisis and regain their earlier stability. References ANZ National Bank Limited, (2010). ANZ in New Zealand. Our Company. Retrieved Online on June 07, 2010 from http://www.anz.co.nz/about-us/our-company/anz-new-zealand/ Australia and New Zealand Banking Group Limited - New Zealand Branch, (January 2009). Supplemental Disclosure Statement. ANZ Annual Report 2008. Retrieved Online on June 07, 2010 from http://www.anz.co.nz/resources/6/b/6b62680040819170820dd3d5d7811059/Branch-SDS-20083009.pdf Australia and New Zealand Banking Group Limited-New Zealand Branch, (August 2009). Supplemental Disclosure Statement. ANZ Half Year Consolidated Financial Report 2009. Retrieved Online on June 07, 2010 from http://www.anz.co.nz/resources/f/d/fd0c828040818f8281fed3d5d7811059/Branch-SDS-20093006.pdf Imbs, J., (2009). The First Global Recession in Decades. The University of the West Indies. Retrieved Online on June 07, 2010 from http://sta.uwi.edu/conferences/09/salises/documents/J%20Imbs.pdf PricewaterhouseCoopers, (2010). Banks Emerging from Recession Gloom Despite Bad Debt Pains. Press Release. Retrieved Online on June 07, 2010 from http://www.pwc.com/nz/en/press-release/banks-emerging-from-recession-gloom-despite-bad-debt-pains.jhtml Share Chat, (2010). ANZ Banks New Zealand Business Posts Drop in 1H profit; Lending Volumes Subdued. Supermarket News. Retrieved Online on June 07, 2010 from http://www.sharechat.co.nz/article/fce9bcc4/anz-bank-s-new-zealand-business-posts-drop-in-1h-profit-lending-volumes-subdued.html Read More