ABC eats Westpac business lunch

It now appears to be taking action to combat this decline.

Westpac boss Peter King has admitted the Sydney-based bank has been too strict in its business lending standards.

“We have probably been a little cautious on our credit metrics over the past 12 months and have reversed that trend,” he said on a call to an analyst to discuss the results.

Westpac CFO Michael Rowland said business loans fell in the six months leading up to March “due to modest demand in most sectors with larger declines in real estate services, agricultural and professional ”.

But they were now showing a greater appetite to borrow, he said.

“In the area of ​​business loans, we have fallen behind in the past, but we are starting to apply the same stringency that we have brought to mortgages,” Rowland told analysts.

“This will help us convert our current pipeline to growth.”

Competition in the business lending market is expected to gain further impetus from Treasurer Josh Frydenberg’s decision to continue the generous corporate tax breaks first unveiled in response to the coronavirus pandemic.

Frenzied spending

The extension of tax breaks announced in this month’s budget is expected to spur a multibillion-dollar spending spree on new machinery and equipment.

Meanwhile, Melbourne-based National Australia Bank is jealously guarding its title as the nation’s largest investment bank.

According to APRA figures, NAB held 21.6% of the country’s business loan market in March of this year.

It has also seen a surge in business loans in recent months.

NAB boss Ross McEwan told analysts on a call earlier this month: “March was good, but it was getting ready until March. I will say April is better than March.

“We are therefore seeing the dynamics gain momentum in investment banking, but also in our personal banking.”

He said that provided the economy remains healthy, “we will be a major beneficiary.”

“Because we’re Australia’s largest investment bank, and we’re very active there. And we are not distracted.

Competition between the Big Four banks in the mortgage market has remained fierce – the unemployment rate has fallen sharply and it has become increasingly clear that they will have to deal with a much smaller number of loans. problematic mortgages than expected.

A year ago, bankers estimated that up to one in five mortgage borrowers who requested a repayment vacation during the coronavirus crisis were in deep financial difficulty.

But thanks to the strength of the economic recovery, this turned out to be an overly pessimistic prognosis.

Quick change

In their latest half-year results, three of the nation’s biggest banks – Westpac, ANZ and NAB – showed how quickly the big banks were able to move mortgage borrowers out of the claims department.

(The numbers aren’t exactly comparable, as the big banks have taken different approaches to weaning customers off loan deferrals and have different loan classifications.)

According to ANZ’s biannual presentation to investors, the Melbourne-based bank has authorized loan deferrals on 121,000 Australian and New Zealand home loans.

Of these deferred loans, 94 percent resumed repayments and 4 percent were restructured – either by being converted to interest-only loans or by extending the term.

Only 2 percent of deferred home loans ended up in the bank’s hardship zone.

It’s a similar story to Westpac. According to the bank’s investor presentation, 149,000 home loans (with a total value of $ 55 billion) caused borrowers to defer their mortgage payment.

Of this total, 92.4% (139,000 loans with a total value of $ 50.8 billion) either resumed or were repaid.

Of the remaining loans, 4 percent were restructured and 3.5 percent were transferred to the bank’s hardship zone. Only 0.1 percent of loans remained deferred in April.

In its presentation of the interim results, the NAB said that about $ 4.9 billion (or about 10% of total deferral balances) of loans that had left the deferral process were behind on repayments and were being managed. case by case.

But, as McEwan explained The Australian Financial ReviewThis slightly higher level of problematic home loans reflected the bank’s approach to encouraging people to resume their repayments earlier.

“There were about 10 percent who needed help after the postponement,” he said.

Early recovery

“Some of them continued to be only interested. One percent we left on the carry forward. The others were placed in individual packaging.

He said the NAB encouraged people to resume loan repayments before the other three big banks did, because “if you can get them back, it’s better for them.” Even if it is reflected in our arrears rates ”.

In its third quarter business update, the Commonwealth Bank said that of the 158,000 home loans (with a total value of $ 54 billion) that had deferred repayments, 81% had resumed regular repayments and 10% had been reimbursed. Four percent had been converted to an interest-only arrangement and 1 percent had been classified as impaired or restructured.

The remaining 4 percent need additional or continued support, the ABC said.

He also reported that home loan arrears – loans with 90 days less interest or principal repayment – had risen to 0.62% of the Australian and New Zealand real estate portfolio in March 2021, from 0 , 57% in December 2020.

But they roughly correspond to the 0.61% recorded in 2019 before the outbreak of the pandemic.

The country’s largest mortgage lender noted that “there was a slight increase in arrears of the mortgage portfolio during the quarter at the end of the deferral program and further modest increases are expected in the coming months.”

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