Suncorp Bank’s housing loan book shrank by 3.1 per cent over the 12 months to September, as the combination of intense competition, accelerated repayment and the bank’s sub-optimal broker application process took its toll. These dynamics are emerging as an industry theme.
In disclosures released yesterday, the bank reported that the value of its housing loan portfolio fell from A$47.6 billion in September 2019 to $46.2 billion a year later.
Consumer loans grew from $152 million to $158 million over the same period and business loans grew from $11.3 billion to $11.5 billion. Credit quality deteriorated, with gross impaired assets to gross loans and advances rising from 25 basis points to 29 bps over the 12 months.
Suncorp said that housing loan lodgement and settlement rates picked up during the September quarter, thanks to an improvement in processing in the broker channel, but this was more than offset by higher levels of repayments.
In addition, increased competition meant that more customers were refinancing.
The bank has had its share of IT problems, announcing earlier this year that it had stopped work on a core banking system upgrade. This has left it with half the bank running on an old Hogan system and half running on the trouble-plagued Oracle replacement.
It’s been a familiar story lately. According to Westpac’s 2019/20 financial report, mortgage balances fell by $6.2 billion to $382.4 billion and the bank reported some borrowers were not paying off their loans, mortgage processing was not up to scratch and the proportion of delinquent loans had increased.
NAB also had a disappointing year in the Australian mortgage market, with home loan balances falling from $304 billion to $299 billion year-on-year. New lending of $37 billion was more than offset by a pick-up in amortisation and external refinancing.
NAB’s delinquent loans rose from 93 basis points to 103 bps year-on-year, while loans on watch list rose from 103 bps to 258 bps.
On loans deferrals, the value of Suncorp Bank home loans on deferrals has come down from $2.4 billion (5.5 per cent of the book) in July to $1.7 billion (4 per cent of the book) in September.
The value of SME loans on deferral has come down from 9.3 per cent of the book in July to 7.6 per cent in September.