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ANZ exec bracing for surge in loan deferral requests

The major bank’s head of retail and commercial banking is anticipating a rise in requests for loan repayment holidays off the back of a second wave of shutdown measures.

According to the Australian Banking Association’s (ABA) latest data, approximately 800,000 borrowers have deferred loan repayments in response to the economic fallout from the COVID-19 pandemic.

But internal data from Australia’s major banks suggests that approximately 20 per cent of mortgage-holders on repayment holidays have since resumed loan repayments.

Speaking to ANZ’s internal media platform, Australian group executive, retail and commercial banking, Mark Hand, added that new enquiries for loan deferrals have eased significantly over the past few months, with borrowers adjusting to the new economic landscape.

“In the early days, we were receiving thousands of phone calls a day, with so much uncertainty,” he said.

“Of late, we’ve been down to a little over a hundred calls a day of customers enquiring about the package. 

“Not all of them will go onto it, but they’ve seen what’s happened over the last two months, they’ve got a much clearer understanding of their own circumstances, so if they’re calling us now, it’s highly likely that it is the right outcome for them.”

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However, Mr Hand has said he expects loan deferral enquiries to ramp up over the next few weeks, in response to a new wave of lockdown measures in Melbourne.

“I’d expect to see the number of enquiries rise in the coming weeks as a lot of customers that might have absorbed the first shutdown, start to realise that the second one is really going to push them to the edge, and they will need that support,” he added.

This is likely to intensify credit quality concerns, with investment management firm Morgan Stanley expecting approximately 20 per cent of borrowers currently on repayment deferrals to default on their debt, triggering a $4.3 billion rise in credit losses across the big four banks alone.

Such concerns prompted the ABA to extend loan relief packages for distressed borrowers.

Following discussions with APRA and ASIC, the banks, including the big four, agreed to extend loan repayment holidays by up to four months (no later than 31 March 2021) for customers unable to meet their obligations due to COVID-induced income loss.

For most lenders, extensions of the repayment holiday will only be considered upon the expiry of current deferral periods (most of which expire in September) and on a case-by-case basis.

Commenting on the rationale behind ABA’s decision, Mr Hand said the industry agreed that borrowers needed more time to assess their financial positions and devise a long-term strategy.

“One of the decisions, or decision points at that time, was to get people through the Christmas trading period, to see how much that helps,” he said.

“That is typically a time where a lot of businesses increase sales. Not all businesses, but a lot of businesses have a very busy season leading into Christmas. 

“We wanted to see [if] we can get them past that timeline [to] give them the best chance of recovery out the other side.

“They’ll have a much clearer view earlier in the new year, in 2021, where they stand and their ability to trade profitably going forward if they’re a small business or if they’re an individual, they’ll have a clear idea of their employment going forward.”

[Related: Deferral extensions ‘significantly’ raise credit quality risks]

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