CBA bank boss Matt Comyn upbeat on loan repayments

Matt Comyn is confident the majority of under-pressure borrowers will restart making loan payments when the lender’s deferral periods end.

CBA is closely monitoring home loan repayment deferrals. ​

Commonwealth Bank chief Matt Comyn is confident the majority of under-pressure borrowers will restart making loan payments when the lender’s deferral periods end, despite the second wave of COVID-19 infections and lockdowns battering Victoria.

Mr Comyn said while loan repayment pause numbers were seeing a “slight uptick” through August in Victoria, that was being more than offset by reductions across other states.

“We certainly believe the majority are in a position to exit their repayment deferrals,” he added.

Mr Comyn said CBA was making contact with impacted customers to closely monitor the transition, although he conceded it would depend on how effectively the virus was suppressed and how Victoria was able to emerge from the turmoil.

The bank reported that 135,000 home loans, or 8 per cent of CBA’s total mortgage accounts, had repayments paused due to the pandemic as at July 31. The number was down from a peak of 154,000.

Of the home loans on deferral, about 14 per cent reflected customers who had lost their job and were receiving the federal government’s JobSeeker payment, with more than half of those being joint accounts where only one borrower was out of work.

There were also 59,000 business loans, or 15 per cent of the total, on repayment pauses, down from a peak of 86,000.

CBA said about 30 per cent of the business loans with deferred repayments were receiving the government’s JobKeeper payment to help retain staff, but it was more difficult to assess how many personal and mortgage customers were receiving the subsidy.

Mr Comyn said it was harder for the bank to distinguish JobKeeper payments into a person’s bank account as it was made via an employer, meaning CBA didn’t have a “sufficiently robust” estimate. “We felt like we were going to understate that,” he added.

CBA is hoping some loan repayment deferral customers will shift to interest-only payments rather than extending the pause.

The latest official data for the entire banking sector showed repayments were frozen on mort­gages and business loans worth $274bn at June 30, or 10 per cent of total loans worth $2.7 trillion.

While this was $8bn higher than the May figure of $266bn, the proportion was unchanged at 10 per cent.

The big four banks are bracing for loan losses as deferral periods come to an end and government support is pared back. They have set aside a combined $5bn for expected COVID-19 loan losses.

S&P Global Ratings analyst Lisa Barrett said while she expected CBA’s credit losses to rise over this financial year, earnings would be high enough to absorb losses.

“A contracting economy, weak business and consumer confidence, falling property prices and high unemployment due to the COVID-19 outbreak and containment measures will further increase CBA’s and other Australian banks’ credit losses in the next year or so, to about 85 basis points of gross loans and advances,” she added.

“Subsequently, we expect that CBA’s credit losses will ease to about 50 basis points of gross loans and advances in fiscal 2022, broadly in line with our expected long-term average for the Australian banks.”

Mr Comyn said additional interest accrued on loans on repayment pauses during the pandemic stood at $310m across mortgages, personal loans and credit cards as at June 30, and another $150m in a category largely reflecting business loans.

The bank’s full-year results also highlighted potential risks across the bank’s loan book and investments, as the broader economy endures its first recession in almost three decades.

CBA booked impairments on its aircraft leasing assets and ­investments of $108m.

The bank also provided detailed analysis on those sectors most impacted by the pandemic that were showing signs of “emerging stress” in business and corporate lending — including retail, transport, manufacturing, recreation and culture.

In air and transport services $184m of the portfolio was impaired as at June 30, almost three times the total from six months earlier, excluding aircraft held on CBA’s balance sheet.

For retail, the bank noted challenging conditions and some ­“single name exposures”, with ­impairments amounting to $77m.

Across accommodation, cafes and restaurants — where CBA has a total committed exposure of $10bn — the bank increased the amount set aside for potential COVID-19 related losses, even as impairments dipped to $122m.

CBA said it had provided more than $650m in new lending to businesses under the government-backed coronavirus loan scheme. That program involves the government guaranteeing 50 per cent of the loan.