Westpac, Suncorp record biggest drops as loan deferral rates ease

Westpac and Suncorp have seen the biggest drop in the level of loan deferrals on their books.

The total number of deferred loans continues to ease from its peak as homeowners resume making mortgage payments. Picture: David Geraghty

Westpac and Suncorp have seen the biggest drop in the level of loan deferrals on their books, as the total number of deferred loans across the sector continues to ease from its peak as homeowners resume making mortgage payments.

However, small business loan deferrals have not budged, a worrying trend given the figures do not capture the entirety of the Victorian lockdown. Banks have granted deferral of loan repayments to borrowers hit by the COVID-19 downturn until January next year, but many lenders have begun contacting customers encouraging them to start repaying loans.

In total, banks had approved $240bn worth of deferred loans at the end of July, representing 9 per cent of the banking sector’s entire lending book, according to figures released by the Australian Prudential Regulation Authority. This is down from $274bn last month.

 

Housing loans make up the bulk of deferred loans at $167bn at the end of July, down from $195bn in June.

Small business loan deferrals of $55bn were unchanged from June — representing a freezing of nearly one in five loans by value.

At $62bn, Commonwealth Bank has the biggest exposure to deferred loans, although this is down from almost $67bn last month. It was followed by National Australia Bank at $55.3bn, down 4.4 per cent.

Westpac saw its number of loan deferrals drop by 25 per cent over the month to $41bn. However, ANZ’s deferred loans bucked the trend and increased 3 per cent, also to $41bn.

Queensland-based Suncorp saw its exposure to deferred loans drop by 22 per cent over the month to $3.5bn.

The figures come ahead of the appearance in front of a parliament committee on Friday of ­National Australia Bank chief executive Ross McEwan and Westpac’s new CEO, Peter King.

Appearing at the house economics committee last week, ANZ and CBA warned of a short lag before they feel the sharp edge of the downturn around the middle of next year, after the government support packages wind down.

ANZ chief Shayne Elliott said he had been having discussions with his senior executive team and the board about scaling up for next year’s expected wave of personal and business insolvencies.

CBA’s Matt Comyn said the size of the economic contraction was less severe than first anticipated, but the nation faced a “long and uneven” recovery.

Official data confirmed this month that the economy reversed by a record 7 per cent in the June quarter due to a collapse in consumption.

ANZ said this week among business loans, repayments were deferred on 22,000 accounts worth $9.5bn — about 14 per cent of the bank’s commercial lending.

Of these, 19 per cent of those loans were to businesses in commercial property and construction, and 18 per cent were to those in accommodation, cafes and restaurants.

Retail businesses accounted for 14 per cent of those with deferred loan repayments.