Westpac still dominating investor lending market

Investor loans accounted for 39.8 per cent of Westpac’s total book, or $170.0 billion, for the year ended 30 September 2017.

However, in the second half (2H17), investor mortgages accounted for $46.8 per cent of total flows. Westpac grew investor lending by 5.9 per cent over the year, ahead of total mortgages (5.7 per cent) and well ahead of the 4.1 per cent growth in 2016. 

The majority (62 per cent) of Westpac customers with an investor loan have one property, while 26 per cent have two properties, 7 per cent have three properties and less than 4 per cent have five or more properties.

Interest-only has played a significant role in the group’s home lending strategy. At a recent parliamentary inquiry, Westpac CEO Brian Hartzer revealed that interest-only lending accounted for 50 per cent of the group’s total mortgage portfolio. However, APRA measures have seen flows fall significantly over the year to 26 per cent at 4Q17.

Announcing a $8.1 billion full-year cash profit for FY17, Mr Hartzer highlighted that loan growth was strongest in Australian mortgages and SME lending, while the group reduced its exposure to certain low-returning segments, including commercial property.

“This is another solid result,” Mr Hartzer said. “We have continued to successfully navigate a challenging environment while our strategy builds momentum.

“Our primary goal in 2017 was to carefully balance growth and returns while meeting all of our new regulatory requirements. As a result, we materially lifted our capital ratio, met new liquidity requirements and operated well within the required macro-prudential targets for home lending. Asset quality is in great shape, with stressed assets reducing during the year.”

The major bank managed to reduce bad debt charges by 24 per cent over the year and lift net interest income by 4 per cent. However, its net interest margin (NIM) declined by 4 basis points.

Mr Hartzer said that the outlook for Australia remains positive overall, with GDP expected to grow by 2.5 per cent by the end of 2018. However, the growth outlook will remain mixed across the country.

“We have a strong customer franchise which continues to grow, we are taking advantage of the opportunities created by a digital world, and we are well positioned in the faster growing parts of our economy,” the CEO said.

“These factors, plus a highly engaged culture that continues to attract great people, gives me confidence about Westpac’s outlook and our ability to outperform over the long term.”

[Related: Westpac to refund $65m to customers]