Recession talk is too early, says Commonwealth Bank

The Commonwealth Bank is seeing a rise, but not a flood, of requests for home loan repayment pauses, as the economy braces for a Covid-19 hit.

Commonwealth Bank retail boss Angus Sullivan. He says that while economic output will be negatively impacted from the pandemic shutdowns, talk of another recession in Australia is premature. Picture: Chris Pavlich/ The Australian

Commonwealth Bank is seeing a rise, but not a flood, of requests for home loan repayment pauses, as the economy braces for a Covid-19 hit from lockdowns plaguing three states.

CBA’s  head of retail banking Angus Sullivan believes while economic output will be negatively impacted from the shutdowns, talk of another recession in Australia is premature.

“Obviously it‘s a negative, whether we go into recession or not I think it’s probably too early to tell. We need to see where the numbers go over the next week or two,” he said.

“Clearly the next couple of weeks are going to be critical and we‘re doing our best to make sure we’re prepared for either scenario, and giving as much support to customers as we can who need it.”

Mr Sullivan said the bank had detailed support communication with more than a million customers, some twice, and about 30,000 people had visited a specific support web page.

He noted so far during the latest Delta Covid-19 outbreak CBA had a couple of thousand customers opt to defer their loan repayments, with more than half the requests coming from NSW and the remainder from Victoria.

“There’s a decent chunk of people that are just finding out more about what’s available … It‘s still a relatively modest number of people (requesting repayment deferral) if you think back to the deferrals that we put in place last year, when we went into the first round of very large lockdowns, we did about 158,000.”

This time round, though, CBA is not extending the loan term if customer defer payments meaning when they resume payments they will be higher.

Mr Sullivan said that was due to the bank leaning more on a digital deferral process this time round which didn’t allow for the term to be changed.

APRA this week reinstated its position on banks offering support to borrowers by way of loan repayment deferrals, due to Covid-19 lockdowns. Banks will not be required to treat ­deferred payments as loan arrears or a restructuring after the regulator moved back to pre-March 31 settings.

Last year, at the height of the pandemic business and home loans on repayment pauses peaked at about 896,000 across the sector, or $266bn. By March, that figure had markedly reduced and was $14bn.

CBA’s head of economics Gareth Aird said tighter restrictions in Greater Sydney alongside lockdowns in Victoria and now South Australia suggested the hit to September quarter economic output would be “a lot” larger than the 1.4 per cent, he previously estimated. The economic contraction could be significantly worse than his estimated 0.7 per cent.

National Australia Bank chief executive Ross McEwan on Thursday said the lender was seeing a rise in customers seeking assistance or loan repayment pauses.

“The longer the lockdowns go, obviously the more people it impacts, and their financial buffers start to get hit,” he added.

On the possibility of negative gross domestic product growth in the September quarter Mr McEwan said:

“We certainly look like we will be going back into negative territory but what we have seen after each of those lockdowns the opening up does bring economic activity back very, very quickly.”

CBA branches have been among venues of interest in Sydney visited by Covid-19 cases, but Mr Sullivan said less than five branches had been “materially impacted”.

“The scale of impact that we‘ve had with our branches to date, it’s very manageable … There’s a little bit of Tetris that we’ve got to play to try and keep as many people in their local government area as possible, and not moving across those boundaries.”