August 15, 2019 / 10:23 PM / 6 days ago

Australia's ANZ records spike in late payments amid shrinking loan book

SYDNEY (Reuters) - Australia and New Zealand Banking Group (ANZ.AX) said on Friday the value of its mortgages with late payments reached its highest level in at least seven years.

FILE PHOTO: The logo of the ANZ Banking Group is displayed in the window of a newly opened branch in central Sydney, Australia, Aprl 30, 2016. REUTERS/David Gray/File Photo

ANZ’s late payment levels are the second-largest reported by Australia’s four biggest lenders after National Australia Bank (NAB.AX), highlighting a small but steady increase in impaired assets and bad debt charges following a sharp property downturn.

While bad-debt charges are still at a low level, analysts are hoping an improvement in Australia’s hard-hit property markets in the past two months flows through to the bank’s loan portfolios.

ANZ said owner-occupied and investor home loans past due 90 or more days were 0.79% of total mortgage lending, the highest level since at least September 2012.

NAB on Wednesday disclosed an increase in past due loans over 90 days to 0.85% of total risk-weighted assets. At Commonwealth Bank (CBA.AX) 90 day arrears in June stood at 0.68% of gross loan advances. Westpac Banking Corp (WBC.AX) is due to disclose credit quality statistics next week.

In a limited market update, ANZ said gross impaired assets also rose 5% to A$1.97 billion ($1.3 billion) in the quarter ended June 30, from A$1.88 billion a year earlier.

MORTGAGE PRESSURE

ANZ said it had introduced clearer lending approval processes and instructed staff to speed up loan applications, leading to a rise in home-loan applicants in July.

Even so, statistics from the banking regulator show Australia’s fourth-largest bank is losing market share in mortgages.

“The 3Q19 release indicates mortgage lending remains under pressure, and it will take some time to see trends normalize should management initiatives be successful,” Citibank analyst Brendan Sproules said in a note to clients.

Australian regulators have eased lending conditions and the central bank has cut interest rates to revive a sluggish economy.

“We are seeing an increase in application volumes following the policy and process changes, next stage is to maintain that,” ANZ Group Executive for Australia Retail and Commercial Mark Hand said in an internal interview transcript released to the exchange.

“We’ve seen investors come back in recent applications to be about 25% to 30% of our volumes.”

The lender’s common equity tier 1 ratio stood at 11.8% at the end of the quarter, higher than 11.5% at March 31.

($1 = 1.4760 Australian dollars)

Reporting by Paulina Duran in Sydney, and Aditya Soni and Nikhil Kurian Nainan in Bengaluru; Editing by Arun Koyyur and Stephen Coates

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