Equities analysts are confident that Westpac’s home loan strategy is its core strength.
Westpac lends a higher proportion of investment home loans – at close to 50 per cent of residential lending – than its peers.
The property investment sector is growing the strongest, with RBA data reflecting a nine per cent increase in investment loans outstanding for the year to June 30, compared to five per cent for owner-occupied loans, according to research by Morningstar.
“Certain commentators view Westpac’s successful home-loan growth strategy as a key weakness, but we argue it is a core strength,” Morningstar analyst David Ellis said.
“Investor concerns, centred on the large exposure to residential mortgages, are overdone,” he added.
APRA banking figures for June reveal investor loans accounted for 43.8 per cent of Westpac’s loan book.
CBA’s investor home loans made up 34.2 per cent of residential lending, while NAB and ANZ held 27.5 and 28.5 per cent respectively.
Total housing loans account for 66 per cent of Westpac’s loan book, fuelling concerns that the lender is overexposed.
While fears of a potential fall in Australian house prices proliferate, Morningstar’s Mr Ellis said Westpac’s underlying fundamentals are sound.
“While Australian home prices have been undoubtedly strong for quite a few years, we’re comforted by several crucial factors,” he said.
“Tight underwriting standards, lenders’ mortgage insurance or, low average loan to value ratios, a high incidence of loan repayment, full recourse lending, a high proportion of variable rate home loans and the scope for interest rate cuts if deemed necessary by the Reserve Bank combine to mitigate potential losses from mortgage lending.”