ANZ and CBA say customers are wiping billions off debt during pandemic

Aussies appear to be approaching their finances differently during the coronavirus pandemic, and it’s hurting the banks’ bottom line.

Two of Australia’s major banks say customers are wiping billions from their credit card debts as the coronavirus-induced recession fuels an environment of heightened financial caution.

In a House of Representatives economics hearing on Friday, both ANZ and Commonwealth Bank said customers had been paying down high interest accruing debt at faster rates to minimise financial pressures during the downturn.

CBA chief executive Matt Comyn said there had been a 17 per cent drop in unsecured personal loan debt, with the country’s largest retail bank recording a $2 billion drop in outstanding credit card debt.

ANZ chief executive Shayne Elliott also said its customers had wiped $2 billion from the bank’s credit card loan book, saying people have become more prudent during the pandemic.

Australia’s big four banks will front the committee chaired by Liberal MP Tim Wilson over the next week to explain how the economic downturn had impacted the sector.

CBA chief executive Matt Comyn said there has been a 17 per cent drop in unsecured personal loan debt. Picture: NCA NewsWire/Gaye Gerard

Since March, institutions have implemented six-month mortgage and loan deferrals for customers experiencing financial hardship due to the pandemic.

Loan deferrals are set to expire at the end of September.

Since the start of the pandemic, CBA has received about one million requests from customers for financial assistance and support.

“We have offered deferrals on 250,000 loans, relating to over $60 billion in loan balances,” Mr Comyn said.

“At the peak, this included deferrals on 154,000 home loans, 86,000 small and medium business loans, and 21,000 personal loans.”

Mr Elliott said about 84,000 of its home loan customers still had their mortgage repayments on pause. The deferrals represent nearly 10 per cent of the bank’s home lending portfolio.

“It is, of course, unsurprising that demand for credit has dropped as business waits to see what the future brings,” Mr Elliott said in his opening statement.

ANZ CEO Shayne Elliott says about 84,000 of its home loan customers still have their mortgage repayments on pause. Picture: Attila Csaszar/AAP

ANZ’s credit card book has fallen from $7.5 billion to $5.5 billion from the drop in credit card use.

Mr Elliott noted the plummet in spending had impacted the bank’s revenue, however other lending categories such as home and business loans had increased.

ANZ said about 15 per cent of customers who had frozen their home loans were still uncertain when they would be able to meet repayment commitments beyond the end of the grace period.

The bank said a number of new loans had been from homeowners refinancing to take advantage of cheaper interest rates.

Mr Elliott said the broader economic impact on the banking sector remained uncertain, however he expected the housing markets to fall by 10 to 15 per cent.

CBA is also anticipating the property market to drop by 10 to 12 per cent, while unemployment will peak in the December quarter at 9 to 10 per cent.

Both CBA and ANZ said stage four lockdowns in Victoria had not caused a significant spike in loan deferrals.

“The size of the economic contraction is less severe than we first anticipated, but we face a long and uneven recovery,” Mr Comyn said.

Mr Comyn did note investment property loan holders may need to consider selling assets in order to reduce outstanding debt on loans.