Almost $40 billion in loans is either overdue or can’t be paid back to banks in the most recent quarter, according to the financial regulator, and that number would’ve been higher had it included the bulk of deferred mortgages.
The Australian Prudential and Regulation Authority (APRA) released statistics on the banking sector’s health covering the quarter ending June 2020. Among an otherwise ordinary report card was a statistic on loan defaults and overdue payments.
Impaired assets and past due items for key non-performing loans had increased to $39.1 billion in the three months until June, an increase of 26.1 per cent compared to the same period a year earlier.
A footnote acknowledged the fallout could’ve been worse was it not for the mortgage deferrals instituted by financial regulators and the banks.
“Total impaired facilities, past due items and specific provisions, as well as the proportion of these indicators to gross loans and advances, have all increased from their levels in the June 2019 quarter,” APRA said in its report.
“... Further deterioration is expected over the next 6 to 12 months given rising unemployment and unwinding of COVID-19 support packages.”
The figure offers a clearer idea of the economic fallout brought by the COVID-19 pandemic and the health restrictions instituted to curb its spread.
About 900,000 loans have had their repayments deferred, according to the Australian Banking Association, amounting to $266 billion.
Banks are beginning the process of contacting half of these borrowers to see if they’ve regained their financial footing to resume mortgage repayments.
Mortgage repayments are up: APRA
Government measures and weakened consumer spending have helped people make their mortgage repayments, APRA said.
Repayments made into offset mortgage accounts increased by $178.2 billion in June 2020 -- a rise of 12.4 per cent compared to the same time a year earlier.
Past due loans increased for both owner occupier and investor mortgages to 1.1 per cent, APRA said, though investor mortgages covered fractionally more ground to do so.
Residential loans 30 to 89 days past due -- but not impaired -- increased to $13.9 billion in the June 2020 quarter, a rise of 0.6 per cent over the same period a year earlier.
However, compared to the March quarter it followed, it represented a fall of 6.4 per cent.
Mortgages are well covered: APRA
For the remaining mortgages outstanding, APRA said they’re “well covered by collateral”.
About 79 per cent of mortgages had a loan to value ratio (LVR) below 80 per cent, while 4.8 per cent had an LVR of 90 per cent. These June quarter figures were the same as those in March.
Interest only loans however continued to decrease to 16.2 per cent -- a drop of 5.5 per cent over the same period last year.
‘A material reduction in cash and liquid assets’: APRA
The combined performance of the 146 Authorised Deposit-taking Institutions (ADI’s, commonly known as banks) experienced a drop over the June quarter.
Assets fell by 4.8 per cent to $5.3 trillion, APRA said, due to a "material reduction in cash and liquid assets, gross loans and advances, and other assets".
The drop wasn’t significant enough to offset the year’s performance; total assets were up by 8.9 per cent over the financial year ending in 2020.