Bank bad debts - An overreaction?

The day that ANZ announced an increased provision for bad and doubtful debts the value of the company fell by $4 billion dollars and has continued to shed a few billion dollars more in the subsequent days. Dr Don Hamson from Plato Investment Management says the story about bank bad debts ‘has been blown completely out of proportion.’ Hamson highlights two factors that underpin his views. Firstly, he notes that the size of the provisions in the scheme of things were relatively small (i.e. ANZ $100 million and Westpac $25 million). Secondly, he believes that the market should have been expecting some additional losses in the resources sector, so these numbers shouldn't really have come as a surprise. In this short video Hamson runs through a quick rule of thumb calculation on what he believes the real quantum of the impact should have been.