Westpac reports rise in bad loans in mining regions

Westpac has reported an increase in souring mortgages in regions affected by the downturn in the mining industry.

Westpac Banking Group had revealed a notable shift in souring mortgages in regions affected by the downturn in the mining industry, mirroring similar signs of an uptick in bad loans revealed in Commonwealth Bank and ANZ accounts this week.

Westpac today said its impairment charge — shorthand for bad loans — over the three months through June was below the average for the preceding six months. Impaired assets were $52 million lower and no impaired exposures over $20m occurred during the period.

In May, the lender revealed that just four major customers added $252 million to its bad debt charge, thought to be failed steelmaker Arrium, bankrupt miner Peabody Energy, law firm Slater & Gordon and transport company McAleese.

But while there were no big names struggling over the last quarter, Westpac said stressed borrowers increased, up 12 basis points to 1.15 per cent of total committed exposure, as home loan delinquencies rose in regions impacted by the mining bust and underperforming businesses were downgraded, mainly in the resources and dairy sector in New Zealand.

Westpac said its provision cover remains high and above sector average, and that the increase in delinquencies mostly reflected changes in reporting of mortgages in hardship, and higher delinquencies in Western Australia, South Australia and Queensland. The bank, however, added another $1.4bn worth of loans on its “watchlist”.

This week Commonwealth Bank and ANZ both revealed a substantial increase in bad and souring loans across the economy, after a long period of high-quality lending.

CBA reported a 27 per cent increase in bad loan costs over the year while ANZ revealed loan losses of $480 million for the third quarter, a level which surprised some analysts.