Powered by MOMENTUM MEDIA
Broker Daily logo

Bank profits sink despite home lending surge

Bank profits sink despite home lending surge
expand image

A spike in credit provisions has triggered a 23 per cent fall in the banking sector’s collective earnings, offset by a $25 billion increase in home loan settlements, the latest APRA data has revealed.

According to the Australian Prudential Regulation Authority’s (APRA) latest quarterly authorised deposit-taking institutions (ADI) statistics, the banking sector’s collective net profit after tax totalled $26.2 billion as at 30 June 2020, down 23.5 per cent from $34.2 billion in the previous corresponding period.

The earnings hit was underpinned by a spike in charges for bad or doubtful debts off the back of the COVID-19 crisis, up 176 per cent, from $4.3 billion in the year ending 30 June 2019 to $11.9 billion.

Total provisions also increased from $12.4 billion to $15.3 billion, in anticipation of a future deterioration in credit quality.

==
==

Offsetting the sharp rise in COVID-related costs was strong home lending growth over the period.

The ADI sector’s collective mortgage portfolio grew 3.3 per cent, from $1.69 trillion to $1.74 trillion, bolstered by a $25 billion increase in new lending, from $86.8 billion in the 12 months to 30 June 2019 to $111.9 billion.

Owner-occupied settlements grew 31.1 per cent over the period, from $58.6 billion to $76.9 billion, while investor lending grew 24.1 per cent, from $25.9 billion to $32.2 billion.

Home lending breakdown

Banks reduced their exposure to interest-only loans over the 12 months to June 2020, down from 20.2 per cent ($17.6 billion) of all settlements to 17.8 per cent ($20 billion).

However, the share of settlements with a loan-to-value ratio exceeding 95 per cent increased, from 1.2 per cent ($1.1 billion) to 1.6 per cent ($1.8 billion).

The proportion of loans with a debt-to-income (DTI) ratio above six also increased, from 14.1 per cent ($12.3 billion) to 15.5 per cent ($17.4 billion).

Meanwhile, a larger share of new loans settled over the 12 months to 30 June 2020 were originated via the third-party channel, up from 49.5 per cent ($43 billion) to 52.4 per cent ($58.7 billion).

 

More on Lender
08 November 2024
ANZ has continued to be the top supporter of brokers among the majors, with broker flows hitting record highs and the ...
08 November 2024
The major bank’s new loans originated from the third-party channel have dipped amid a competitive market.
07 November 2024
With the number of brokers now totalling around 21,000 across the country, the industry has never been bigger.