The value of total loan deferrals in Australia has fallen month-over-month to approximately $50 billion or 2% in November 2020 according to the Australian Prudential Regulation Authority (APRA)’s monthly disclosure on loan repayment deferrals. This compares to the peak of more than $250 billion or 10% in May 2020.
Goldman Sachs has summarised its key takeaways on loan deferrals and the improvements it has observed in the big four ASX banks. We take a closer look.
Big four ASX banks analysis
Westpac Banking Corp (ASX: WBC) currently has the most substantial share of deferrals, which can be explained by its large balance sheet, according to Goldman.
Adjusting for balance sheet size, Australia and New Zealand Banking Group Ltd (ASX: ANZ) would appear to have the largest proportion of its loan book on deferral, sitting at 3%, down from 5% in October. National Australia Bank Ltd (ASX: NAB) has the least, with 1%, down from 3% in October. The Commonwealth Bank of Australia (ASX: CBA) sits in the middle with total deferrals of 2.5%.
In the six months of available data, Goldman observes that NAB and Bank of Queensland Limited (ASX: BOQ) have seen the biggest net improvement in mortgage deferrals as a percentage of 31 May 2020 balances.
Consistent with disclosure provided in its FY20 result, ANZ’s mortgage deferrals fell away significant back in October, but it still experienced the least improvement on this measure.
Private credit growth steady in November
The Reserve Bank of Australia (RBA) has also provided updates on private credit for November 2020. In the month, business lending momentum remained weak and was down -0.2% month-on-month (vs. -0.3% in September).
That said, on a year-on-year basis, lending growth is positive, up by 0.9% given the solid trends seen in March and April from efforts by corporates/SMEs drawing down credit to support cashflows amidst the COVID-19 disruptions.
The update cited housing credit growth showing signs of life, increasing 0.3% month-on-month in November, while year-on-year growth remained unchanged at 3.4%.
Owner-occupier growth remains the driver of total mortgage growth and was up 0.5% month-on-month in October, while investor lending remains subdued at -0.1% year-on-year. Personal credit remains very soft and was flat month-on-month with year-on-year trends running at -12.4%.
Overall, private and housing credit growth has remained steady in November, which feeds into the recent recovery for the big four ASX bank shares.