Powered by MOMENTUM MEDIA
Broker Daily logo

Westpac lending concerns ‘overdone’

Morningstar has argued that Westpac’s successful mortgage strategy is a “core strength”, not a “key weakness” as certain commentators have claimed.

In a research report released Monday, Morningstar analyst David Ellis said that investor concerns – centred on Westpac’s large exposure to residential mortgages – are “overdone”.

“Certain commentators view Westpac’s successful home loan growth strategy as a key weakness, but we argue it is a core strength,” Mr Ellis said.

On Monday Westpac reported its first-half fiscal 2015 profit results, which showed loans up seven per cent.

==
==

“Market competition continues to pressure net interest margins, but with the strong pricing power enjoyed by the big four banks, we expect Westpac to maintain underlying margins at about two per cent,” Mr Ellis said.

The Morningstar report noted that the quality of Westpac’s residential loan book continues to improve with historically low rates keeping a lid on mortgage delinquencies.

“Looking forward, internal stress testing on the mortgage portfolio estimates cumulative total losses of $2.3 billion over three years for the uninsured home loan portfolio,” it said.

The stressed scenario includes unemployment rising to 11.6 per cent, house prices tumbling 26 per cent and the economy falling into recession. In addition, Westpac estimates cumulative claims on lender mortgage insurance of $879 million over three years, Morningstar noted.

 

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.