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Major bank loses $2 billion in investor loans

A big four bank has seen its investor loan book shrink over the 12 months to October, while its peers managed to grow investor home lending despite ongoing regulatory pressures.

APRA’s latest monthly banking statistics show that ANZ’s investor loan book was valued at $80.714 billion at the end of October this year, down 2.4 per cent – or $2 billion – from $82.718 billion in October 2015.

ANZ was the only big four bank to see its investor loan book shrink over the year. CBA recorded the greatest increase in investor loans at 5.1 per cent, while NAB and Westpac grew their investor books by 3.5 per cent and 3.9 per cent respectively.

ANZ boss Shayne Elliott has made several cautious remarks about the Australian housing market in recent months and even admitted that the group would be happy to give up some market share.

Speaking at the release of the group’s full-year results in early November, Mr Elliott said the bank was looking to hold its share of the mortgage market (currently 15.5 per cent) or even “give up a little of market share” due to rising risks.

“Now, we’re not sitting here suggesting that, and it’s not our core case that we think that house prices are going to fall. I’m not suggesting that for a minute. But … when you are lending 80 per cent or 90 per cent of the value of a new home and when you’re seeing such volatility in prices (we’ve been used to them going up at double digit), it doesn’t take a lot for them to construct a scenario where they go down at double digit.

“[So], if you’ve lent 90 per cent of the value, [then] very, very quickly you can end up under water... So we’re a bit more cautious, [we’ve] got to be really careful about that.”

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Mr Elliott also flagged the bank’s concerns about ‘underemployment’, where workers are employed part-time rather than full-time or are doing jobs that they are over-qualified for.

“What we’re seeing in Australia … [is that] more and more Australians are not working to the full capacity that they would like to, so they’re doing less hours,” he said.

“Secondly, there’s been a big transition where people were in higher paying jobs – maybe because of overtime, maybe they were in the mining sector – are now in lower paid jobs. So, their household income is either stagnant, flat, or it’s falling. That means that it’s a little bit harder for them to keep up with their mortgage payment or whatever payments and commitments they have.

“So, we’re just saying, in that environment, let’s just be really cautious about who we’re lending to. We just don’t think it’s the right time to be out on the front foot too aggressively.

“[We’re] still in the market, we still want to grow … and we want to lend, we want to help people into their homes. But we just want to be a little bit more cautious than we’ve been in the past… If that means we give up a little bit of market share, that’s OK.”

At a Reuters event in Sydney earlier this month, Mr Elliott warned that there were “emerging signs of stress” in Australian mortgages.

This week, S&P Global Ratings revealed that prime mortgage arrears in Q3 were approximately 25 per cent higher than in the same quarter last year, but remained below their peak of 1.69 per cent.

[Related: ANZ CIO steps down as bank names new tech boss]

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