Aussie resources keep market higher at open as banks get hammered on exposure to bad debt

Australia's resources stocks kept the market higher at the open.

At 1010 AEDT on Tuesday, the benchmark S&P/ASX200 index was up 11.5 points or 0.23 per cent at 5,095.7, while the broader All Ordinaries index was up 12.1 points or also 0.23 per cent at 5,163.7.

Aussie banks were hammered at open as fallout from ANZ's increased bad and doubtful debt (BDD) provisioning on the back of its exposure to Peabody and Arrium continues, with consumer and business lending related debt set to increase, rising the prospects of further one-off write offs and BDD increases, IG market strategist Evan Lucas said.

"(BDD) confessions are growing by the day," Lucas said.

Though resource and energy stocks represent approximately 1.5 percent of total bank exposures, 62 billion U.S. dollar has been lent out in syndicated loans in the past five years, equating to 22 percent of total syndicated loans the "Big Four" participated in.

"This is where the problem really lies," Lucas said, adding risk exposed resource syndicated debt is approximately one-quarter of the participated loans.

"This is based on resource firms that have a net debt-to-equity that would be described as 'high' and where free-cash-flow is either just or not covering interest repayments."

"Again, ANZ has the highest level of exposure to this group."

However, the unknowns are the exposures of service related syndicate loan debt, such as loans provided to failed electronics retailer Dick Smith and listed law firm Slater and Gordon which are likely to be also be big exposures to the banking sector.

"(National Australia Bank) has the biggest exposures to these names," Lucas said.

At the open, ANZ fell 1.75 percent, the Commonwealth Bank of Australia dropped 0.95 percent, the National Australia Bank lost 1.07 percent and Westpac was down 1.39 percent.

BHP Billiton rose 0.59 percent, rival Rio Tinto added 0.83 percent and gold miner Newcrest was up 1.72 percent.

Oil Search gained 0.89 percent, Santos added 0.74 percent while Woodside Petroleum was 0.93 percent stronger.

Wesfarmers lifted 0.93 percent however Woolworths slipped 0.22 percent.

Qantas shed 0.98 percent while Telstra edged 0.10 percent higher. Endit