Loan deferral exits pick up pace

New data from the Australian Prudential Regulation Authority (APRA) for the month of September has revealed that the volume of loans held by authorised deposit-taking institutions (ADI) has fallen for the third month in a row.

As at 30 September, $66 billion worth of loans expired or exited deferrals, while just $17 billion worth of entries were approved or extended.

The pace of exits increased significantly over the month, with total exits increasing 169 per cent from $24 billion in August, with the majority of these loans returning to a performing status.

APRA data has also shown that $179 billion worth of loans have been granted temporary repayment deferrals, which is around 6.7 per cent of total loans outstanding.

This is down from 8.5 per cent of total loans outstanding as at 31 August that had temporary repayment deferrals applied to them, equating to around $229 billion worth of loans.

Housing loans comprise the majority of total loans granted repayment deferrals, with $133 billon worth of loans having been deferred, which is 7.4 per cent of total loans.

However, small-to-medium enterprise (SME) loans have a higher incidence of repayment deferrals, with 10.8 per cent of SME loans subject to repayment deferral, worth $35 billion.

As a proportion of total loans, total loan deferrals comprised 7 per cent of total loans as at 30 September, while housing loan deferrals comprised 7 per cent of housing loans and SME loan deferrals equalled 11 per cent of all SME loans.  

As at 30 September, 9 per cent of borrowers continued to make partial repayments while 10 per cent continued to make full repayments.

As a share of housing loans, the Northern Territory comprised 13 per cent of all housing loan deferrals, while Victoria made up 12 per cent, Queensland made up 11 per cent, Western Australia made up 10 per cent, Tasmania made up 10 per cent, NSW made up 9 per cent, the ACT made up 9 per cent and South Australia made up 9 per cent.

Major banks report deferrals data

Several of the lenders have also begun individually reporting their loan deferral statuses.

Westpac released its 2020 full-year (FY20) results on Monday (2 November), in which it provided updated figures of its loan repayment deferral support.

The major bank reported that as at 28 October, 41,000 mortgage accounts have deferred their home loans, totalling $16.6 billion.

This has reduced from $54.7 billion in total deferrals provided, over 146,000 mortgage accounts.

Small-business loans in deferral have reduced from $10.1 billion provided for 32,900 small-business customers to $1 billion over 4,300 small-business customers.

Commenting on the figures, Westpac CEO Peter King said: “We are continuing to assist customers affected by COVID-19.

“It has been pleasing to see a reduction in the number of our customers on loan deferral packages. More than two thirds of Westpac’s mortgage customers who deferred payments have now recommenced repayments."

Mr King, however, added: “We do recognise, though, that for some customers the pandemic will have a longer-term effect on their circumstances, and we are committed to supporting them as much as possible.”

The big four bank reported that it provided $54.6 billion in total mortgage deferrals since March 2020, which reduced to $30.4 billion at 31 July, and $19.2 billion at 19 October.

Following the expiry of deferrals after six months at 19 October, 66 per cent of deferred loans returned to repayments, while 31 per cent of loans received a four-month extension to 2021, while only 3 per cent of loans were restructured or received hardship facilities.  

Westpac’s credit impairment charges were lower in the second half of 2020 at $940 million after increasing significantly in the first half of the year to $2.24 billion. However, in the second half 2020, impairment charges are still more than double the prior corresponding period.

“With material increases in provisions early in the year, a large number of consumers returning to repayment in the fourth quarter of 2020 and an improving (albeit still weak) economic outlook, the need for further significant top-ups to provision levels diminished through the half,” Westpac said.

Westpac’s update of its results followed those by ANZ, which reported that out of the 95,000 loans to have deferred repayments in total, around 55,000 accounts had already completed their deferral or advised their intended action on maturity as at 15 October.

Over three-quarters (79 per cent) of these are returning to full payment, while 20 per cent of borrowers have requested a further deferral, and 1 per cent have restructured their loan and sought additional support, moving to interest-only or directly into hardship.

[Related: Deferral expiry to push up non-performing loans: Moody’s]