New financial results from Commonwealth Bank show that for the calendar year 2016, the proportion of new investor home loans being written in Australia grew by 6 per cent.
The profit announcement for the half year ending 30 December 2016 shows that while investment home loans as a proportion of the home loan portfolio in Australia were holding steady at 33 per cent, the number of new business investment loans grew by 4 per cent between June 2016 and December 2016.
Further, the amount of new investment loans being written between December 2015 and December 2016 grew by 6 per cent (to 37 per cent).
With the rise in investor home loans, the proportion of owner-occupied home loans dropped to 62 per cent (from 66 per cent as at December 2015, and from 65 per cent from the prior half year).
The figures appear to back APRA’s latest Monthly Banking Statistics, which found that CBA had the highest rate of investor home loan growth of the big four banks and estimated its portfolio to have grown by 7.2 per cent to $137.3 billion over the 12 months to 31 December 2016.
The investment loan figures are of note given APRA’s 10 per cent speedlimit that has been in place for investor lending since 2014.
Indeed, as CBA nears the 10 per cent limit, the bank has announced a series of changes to its investor loans. As of this week, the big four bank has suspended the acceptance of new refinance applications for investment home loans and announced that it will be increasing rates on its interest-only mortgages for investors by 12 basis points – bringing the standard variable rate for these loans to 5.68 per cent per annum.
However, the bank has stressed that it has not surpassed the 10 per cent benchmark yet.
Speaking at a media briefing for the half-year results, CEO Ian Narev commented: "The first thing I can say unequivocally is that we haven't exceeded the regulatory benchmark... I know it can be extremely frustrating looking at this from the outside because the numbers that APRA look at are not really aligned with any numbers people see externally. We are absolutely not over the benchmark.
"I will also say that the benchmark, which is on 10 per cent growth in investor balances year-on-year, is something that our regulator takes very seriously and we take very seriously and we will do what we need to do to ensure we don't go over the benchmark."
Mr Narev continued: "There is a lot of activity in that market and as a result there have been a lot of flows, and we've had to be a little bit careful about the flows coming in. We've done that in a couple of ways, yes we have raised the standard variable rate for some investor loans... and secondly we have changed some aspects of the policies applied to that so that we can make sure we can look after our own customers first. So there has been more of a restriction placed on refinancing from other financial institutions so we can make sure when our customers walk in we can help them."
He concluded: "APRA and the RBA have both made clear that they want to make sure that the rate of investor growth in the market is not excessive, and as a result that benchmark was put in and clearly its important to us to act in a way which is compliant with what our regulators want. This does not come from credit risk from us, it comes from a more macroprudential focus from the regulators which we'll comply with."
Half year results
As well as showing a rise in new investment lending, CBA’s half-year results reveal that in the six months ending 31 December 2016, it secured 140,000 new home loans, including 15,000 for first home buyers – with its market share rising to 25.4 per cent.
Home loan balances for the group increased $16 billion or 4 per cent on the prior half, and $35 billion or 8 per cent on the prior comparative period to $473 billion, largely driven by retail banking services, New Zealand and Bankwest.
The Bankwest subsidiary saw home loan growth of 5 per cent, reflecting a “slowing Western Australia economy”.
Loan impairment expenses increased 6 per cent on the prior comparative period to $599 million driven by an increase in retail banking services as a result of higher home loan and personal loan losses, predominantly in Western Australia and lower home loan provision releases and higher growth in New Zealand lending portfolios.
Broker share was up 2 per cent on December 2015, taking the proportion of home loans written in Australia through the third-party channel to 46 per cent. However, new business written through the channel fell by the same amount.
Overall, statutory net profit after tax (NPAT) was $4.895 billion, up 6 per cent on the year ending December 2015.
[Related: Analysis: The investor lending dilemma]