Latest banking statistics shows COVID-19 loan deferrals trending down

Latest data from the prudential regulator shows the number of loans on hold due to COVID-19 are trending down.

Loan repayments placed in deep freeze because of the uncertainty fuelled by the 2020 coronavirus pandemic are trending down, according to the prudential regulator.

Latest figures from the Australian Prudential Regulation Authority show at the end of November 2020 $60bn worth of business and mortgage loans remained on pause through deferral schemes implemented at the beginning of the pandemic.

The total value of loans still on hold is roughly valued at around $2.7 trillion and represents 2.3 per cent of the total number of loans issued by lenders.

At the height of the COVID-19 lockdown, deferred loan repayments represented approximately 10 per cent all loans on issue in Australia.

The country’s banking sector implemented loan deferrals in response to the economic downturn sparked by the pandemic. This allowed people facing financial hardship to suspend repayments up until March 2021.

Banks implemented loan deferrals for customers facing financial hardship because of COVID-19. Picture: Joel Carrett/ AAP.

Loan suspensions have in part been ticking down as Australia’s economy continues to recover from the downturn.

APRA said deferral exits continued to outweigh the number of new entries for the fifth straight month in a row, with $32bn of paused loans expiring and only $7bn being added or extended.

“Victoria remains the state with the highest proportion of loans subject to deferral among the states and territories, with 3.2 per cent of loans deferred compared with the rest of the country at 1.7 per cent,” the regulator said.

Suspended home loan repayments remain higher than the number of paused small business loans.

Australian Banking Association chief executive Anna Bligh said in November the number of people resuming repayments was better than initially expected.

“Australian banks have played a major role in carrying the economic burden of the pandemic for their customers. The good news is that the majority are now bouncing back as they restart their loan repayments,” Ms Bligh said in a statement.

Australian Banking Association CEO Anna Bligh says the number of resumed payments is better than expected. Picture: Bianca De Marchi/ AAP

The drop in deferrals also coincides with a 4.3 per cent rise in home lending growth across the banking sector.

Morgan Stanley analysts said growth at ANZ and Commonwealth Bank outpaced the other two major lenders, rising 6.6 per cent and 6.1 per cent respectively.

However, business lending and household deposits had slowed.

“System business lending declined by approximately 7 per cent annualised in November, which APRA believes reflects large corporates continuing to repay loans drawn in March,” the brokerage said in a note issued to investors.

“The growth in household deposits slowed in November, with system-wide deposits up $1.1bn or 0.1 per cent month-on-month. This compares with month-on-month growth of 0.9 per cent in October.”