Powered by MOMENTUM MEDIA
realestatebusiness logo

Subscribe to our newsletter

Bank funding gap narrows further

In a positive note for the Australian banking sector, a report by ratings agency Moody’s shows that the funding gap of local banks continues to narrow.

At the height of the financial crisis in 2008/2009, the spotlight was firmly brought onto the proportion of funds Australian banks – particularly the big four – sourced offshore to fill the gap between customer deposits and financing their growing loan portfolios.

The report, Australian Bank Funding and Liquidity: Domestic Funding Gap Continues to Narrow, noted that year-on-year deposit growth continued at nine per cent in the six months to 31 March. Loan growth over the same period sat at eight per cent.

Tanya Tang, the report’s author, said that the narrowing domestic funding gap has stabilised wholesale debt issuance by Australia's major banks, and that short-term debt remains well below previous peaks.

Additionally, overall deposit quality has improved, as banks have focused on gathering more stable deposits following the full implementation of the Liquidity Coverage Ratio (LCR) regime on 1 January this year.

Advertisement
Advertisement

In breaking down borrower demand, Ms Tang said business lending had rebounded strongly over the half year, although this is not expected to continue.

“While business growth rebounded over the period due to lower interest rates and increased competition amongst banks, its sustainability is questionable given that business confidence remains patchy and the capital expenditure outlook is weak,” she said.

There were no surprises when it came to investor lending, which grew more rapidly than any other lending segment. As a result, Ms Tang said Moody’s supported APRA’s intervention in investor lending.

“We view the imposition of regulatory restrictions on investor housing to be credit positive, in light of growing housing market imbalances in inner Sydney and Melbourne.”

Bank funding gap narrows further
>At the height of the financial crisis in 2008/2009, the spotlight was firmly brought onto the proportion of funds Australian banks – particularly the big four – sourced offshore to fill the gap between customer deposits and financing their growing loan portfolios.

The report, Australian Bank Funding and Liquidity: Domestic Funding Gap Continues to Narrow, noted that year-on-year deposit growth continued at nine per cent in the six months to 31 March. Loan growth over the same period sat at eight per cent.

Tanya Tang, the report’s author, said that the narrowing domestic funding gap has stabilised wholesale debt issuance by Australia's major banks, and that short-term debt remains well below previous peaks.

Additionally, overall deposit quality has improved, as banks have focused on gathering more stable deposits following the full implementation of the Liquidity Coverage Ratio (LCR) regime on 1 January this year.

In breaking down borrower demand, Ms Tang said business lending had rebounded strongly over the half year, although this is not expected to continue.

“While business growth rebounded over the period due to lower interest rates and increased competition amongst banks, its sustainability is questionable given that business confidence remains patchy and the capital expenditure outlook is weak,” she said.

There were no surprises when it came to investor lending, which grew more rapidly than any other lending segment. As a result, Ms Tang said Moody’s supported APRA’s intervention in investor lending.

“We view the imposition of regulatory restrictions on investor housing to be credit positive, in light of growing housing market imbalances in inner Sydney and Melbourne.”

Bank funding gap narrows further
mortgagebusiness

Latest News

Discover some of the top news stories impacting the mortgages space in this weekly wrap-up. ...

The financial watchdogs have remained wary of risks to the housing market as cash rate rises flow through to mortgage customers. ...

Australia’s household wealth has reached $14.9 trillion largely due to house price momentum, yet quarterly growth has continued its recent...

VIEW ALL

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!

What is the maximum proportion of income borrowers should use to service a mortgage?

Website Notifications

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