CBA’s home loan deferrals tick up in Victoria, amid COVID-19 lockdown

CBA says requests for payment deferrals have risen amid Melbourne’s lockdown, in contrast to the rest of the country.

Angus Sullivan said CBA had increased the number of people in its hardship and collections unit from 650 to 1700.

The second lockdown in Victoria has led to a “modest” increase in home-loan deferral applications and correspondingly eroded the state’s level of spending, Commonwealth Bank has said.

CBA retail banking services boss Angus Sullivan said deferral applications in Victoria had spiked 10-15 per cent at the halfway point in the six-week lockdown.

“The effects have not been dramatic which gives us a good sense of the impact being modest, even though Victoria is going through difficult and challenging times,” Mr Sullivan said in an interview.

Leaving aside Victoria, the number of deferred home loans across the nation was falling as customers chose to resume repayments or continued to service their loans in full or in part.

This was a good indication that a majority of CBA’s customers would be able to exit deferral arrangements after September 30 by making some form of repayment, according to Mr Sullivan.

The CBA chief said government assistance packages like JobKeeper and JobSeeker had made a “huge contribution” to alleviating hardship, and he called for more targeted assistance once the packages started to wind down at the end of next month.

“The important balance to strike, which is on my mind and I presume it’s on the government’s mind as well, is to become increasingly targeted with that support,” he said.

“We have to narrow the spectrum of support to enable the country to get back on its feet, which is why we have resources ourselves in the way we have.”

CBA, he said, had increased the number of people in its hardship and collections unit from 650 to 1700.

The bank said at its annual result earlier this month that it had deferred 135,000 home loans, or eight per cent of accounts, worth $48bn.

About 25 per cent had made at least one payment since deferral, with one quarter of all deferred loans in Victoria, and less than 20 per cent of customers were in higher risk occupations such as retail, airlines, hospitality, tourism, travel and food.

Mr Sullivan said CBA’s home-lending business continued to outperform the broader market, growing at 1.3 times the wider banking system.

The bank, he said, had a technological advantage, enabling approvals to be issued in 2-5 days from receipt of a customer’s application.

Rivals such as Westpac and ANZ Bank have acknowledged over the last year or so that they’ve given up market share because of mortgage processing challenges.

They have since said the problems have been fixed and volumes have been increasing.

The other significant trend in the retail bank, according to Mr Sullivan, was strong deposit growth, with more money flowing into customers’ accounts due to the superannuation early access scheme and an overriding trend of lower spending.

CBA’s deposit funding ratio lifted by a record margin from 69 per cent a year ago to 74 per cent.

This was driven by a $25bn, or 9.8 per cent, increase in household deposits.

Mr Sullivan said the overall level of industry risk in relation to deferred loans looked okay.

“Most of the banks have highlighted there is a minority of the deferral book where there’s a real challenge,” he said.

“The real question is the middle 70 per cent (of deferred accounts) which we have to watch most closely to see where it’s going, but from what we can see so far it looks okay.”