KEY POINTS:
National Australia Bank and ANZ Bank are seen as the two big banks most likely to announce further writedowns to their structured credit exposures - potentially up to A$1 billion ($1.2 billion) each.
The dire prediction came in a report by investment bank Citi.
National Australia Bank operates BNZ in New Zealand and ANZ operates ANZ National.
The warning comes less than two months after NAB surprised the market with a A$830 million provision against a A$1.2 billion collateralised debt obligation portfolio, which contains some A$360 million in US sub-prime assets.
NAB is estimated to have about A$15 billion worth of conduit assets, with about A$9 billion originated by the bank.
But concern is mounting about its A$4.5 billion of purchased CDOs - assets bought to start the conduits.
Citi estimates possible writedowns from NAB, based on a "10-20 per cent haircut", at A$500 million to A$1 billion. A NAB spokesman said its position had not changed.
"We have made the writedown on the portfolio that we announced," he said.
"In the other portfolio we hold principally senior positions and it's a different asset mix as well, so we are comfortable with the position there. But, obviously, if that changes we would have to make an announcement of some sort and keep the market informed."
ANZ Bank is also considered to be at risk of making further provisions relating to its credit default swap exposure.
Citi estimates US$11.6 billion ($17 billion) of the US$23.4 billion purchased CDS protection relates to credit intermediation trades. Its assessment of the additional writedowns above those already incurred could be in the range of A$500 million-A$1 billion.
In February, ANZ announced a US$200 million provision in relation to US bond insurer ACA. Australian
