ANZ said full-year earnings could fall by up to 25 per cent as the bank flagged A$1.2bn of second half provisions arising from deteriorating credit markets, a weakening New Zealand economy and a softening Australian economy.

The surprise increase in provisions, which will now total close to A$2.2bn after including those for the first half, triggered the biggest drop in the Australian bank’s share price since the 1987 stock market crash.