Westpac CEO Brian Hartzer believes the group will see a further increase in delinquencies in the second half of 2016.
The major bank released its half-yearly results yesterday, which saw the group post a 3 per cent profit increase.
Mr Hartzer said while asset quality will remain sound overall, he expects bad consumer loans to rise.
“We expect some increase in consumer delinquencies over the second half, but this is likely to be concentrated in segments and sectors that are more reliant on the resources industry,” he said.
“In this environment, and with the significant strengthening of our balance sheet, we will continue to manage the group in a disciplined way.”
In a trading update, Westpac said impairment charges were up 19 per cent in its consumer bank division as collectively assessed provisions increased, consistent with higher delinquencies and the larger portfolio.
“In the consumer sector, unsecured consumer delinquencies are higher over first half 2016, consistent with normal seasonal trends (which typically see delinquencies rise in the first half of the year),” it said.
“The auto finance portfolio has seen a greater increase in delinquencies, with around half the increase due to some operational challenges impacting collection processing (and which are expected to be corrected in second half 2016) and from increased stress in regions impacted by the slowing of the mining investment cycle.”
Westpac’s total consumer unsecured 90+ day delinquencies increased 35 basis points since 30 September 2015 and 25 basis points since 31 March 2015, driven by its Australian portfolios.
Australian mortgage 90+ day delinquencies were at 0.55 per cent at 31 March 2016, an increase of 10 basis points from 30 September 2015 and 8 basis points higher compared to 31 March 2015.
“Around 4 basis points of this increase has been due to a change in the measurement and reporting of delinquencies for customers granted hardship assistance,” the bank said.
“The remaining increase in mortgage delinquencies is consistent with normal seasonal trends and some regional challenges.
“Despite the low level of delinquencies, the modest pace of economic growth and rising unemployment in some regions has contributed to higher delinquencies in certain areas, especially in those states and regions impacted by the slowing of the mining investment cycle.”
Realised mortgage losses were $35 million for first half 2016.