Powered by MOMENTUM MEDIA
subscribe to our newsletter

Westpac lending concerns ‘overdone’

Morningstar has argued that Westpac’s successful mortgage strategy is a “core strength”, not a “key weakness” as certain commentators have claimed.

In a research report released Monday, Morningstar analyst David Ellis said that investor concerns – centred on Westpac’s large exposure to residential mortgages – are “overdone”.

“Certain commentators view Westpac’s successful home loan growth strategy as a key weakness, but we argue it is a core strength,” Mr Ellis said.

On Monday Westpac reported its first-half fiscal 2015 profit results, which showed loans up seven per cent.

“Market competition continues to pressure net interest margins, but with the strong pricing power enjoyed by the big four banks, we expect Westpac to maintain underlying margins at about two per cent,” Mr Ellis said.

Advertisement
Advertisement

The Morningstar report noted that the quality of Westpac’s residential loan book continues to improve with historically low rates keeping a lid on mortgage delinquencies.

“Looking forward, internal stress testing on the mortgage portfolio estimates cumulative total losses of $2.3 billion over three years for the uninsured home loan portfolio,” it said.

The stressed scenario includes unemployment rising to 11.6 per cent, house prices tumbling 26 per cent and the economy falling into recession. In addition, Westpac estimates cumulative claims on lender mortgage insurance of $879 million over three years, Morningstar noted.

 

Westpac lending concerns ‘overdone’

PROMOTED CONTENT


>In a research report released Monday, Morningstar analyst David Ellis said that investor concerns – centred on Westpac’s large exposure to residential mortgages – are “overdone”.

“Certain commentators view Westpac’s successful home loan growth strategy as a key weakness, but we argue it is a core strength,” Mr Ellis said.

On Monday Westpac reported its first-half fiscal 2015 profit results, which showed loans up seven per cent.

“Market competition continues to pressure net interest margins, but with the strong pricing power enjoyed by the big four banks, we expect Westpac to maintain underlying margins at about two per cent,” Mr Ellis said.

The Morningstar report noted that the quality of Westpac’s residential loan book continues to improve with historically low rates keeping a lid on mortgage delinquencies.

“Looking forward, internal stress testing on the mortgage portfolio estimates cumulative total losses of $2.3 billion over three years for the uninsured home loan portfolio,” it said.

The stressed scenario includes unemployment rising to 11.6 per cent, house prices tumbling 26 per cent and the economy falling into recession. In addition, Westpac estimates cumulative claims on lender mortgage insurance of $879 million over three years, Morningstar noted.

 

Westpac lending concerns ‘overdone’
mortgagebusiness

Latest News

An industry poll has been launched to understand the key issues impacting mortgage and finance industry professionals leading up to the 2022...

The mutual bank has confirmed that it has reached a milestone figure of $10 billion in assets. ...

The financial complaints body has recruited a new leader for its compliance and monitoring team. ...

Join Australia's most informed brokers

Do you know which lenders are providing brokers and their customers with the best service?

Use this monthly data to make informed decisions about which lenders to use. Simply contribute to the survey and we'll send you the results directly to your inbox - completely free!

Do you think APRA's bank buffer changes will see more borrowers use non-banks?

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.