Australia Westpac’s bad debts decline, set to weather housing downturn

A pedestrian looks at his phone as he walks past the logo of Australia’s Westpac Banking Corp outside a branch in central Sydney, Australia November 5, 2018. REUTERS/David Gray/File Photo/ File Photo

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Aug 15 (Reuters) – Westpac Banking Corp (WBC.AX), Australia’s third-largest mortgage lender, said on Monday its bad debts fell to a multi-year low in the June quarter, creating a financial buffer as country’s real estate market. goes into recession.

The Sydney-based company said mortgages with overdue payments of more than 30 or 90 days fell in the three months to the end of June to their lowest level since the start of 2020. non-residential consumption rose slightly from three months earlier.

The figures, included in a limited trade update, bolster a sense of confidence among major Australian retail lenders that two years of savings accumulated by customers during COVID-19 pandemic restrictions will protect their balance sheets just as the economy is cooling.

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With four consecutive months of interest rate hikes since May and more expected as the central bank tries to stamp out inflation, Australian house prices have started to fall as loan repayments increase .

“The update shows that credit quality remains strong and we continue to see the release of provisions,” said E&P Financial Group’s Azib Khan, referring to the release of provisions that all major banks had been building since 2020. for potential pandemic-related defaults.

Analysts at wealth manager Ord Minett said Westpac’s update, which did not include earnings numbers or guidance, showed “credit quality trends remain strong and improving.”

Shares of Westpac, which soared more than 3.0% last week, were down 0.8% in morning trade against the broader market’s 0.5% rise (.AXJO).

Many analysts, and the banks themselves, have said the impact of aggressive interest rate hikes since May on people’s ability to repay loans may not show up for several months.

Still, for the June quarter, total “stressed exposures” for Westpac – which include non-residential consumer loans – fell to 1.06%, the lowest level since 2017, the bank said. This metric includes loans deemed “substandard”, loans 90 days past due but not technically impaired, and impaired loans.

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Reporting by Harish Sridharan in Bengaluru and Byron Kaye in Sydney; Editing by Diane Craft and Muralikumar Anantharaman

Our standards: The Thomson Reuters Trust Principles.

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