Commercial property values plunge

A Gold Coast property in Bendigo and Adelaide Bank's possession had a valuation of $5 million when the bank accepted it as security for a loan. In December the valuation had dropped to $3 million and the current valuation is $1 million.

Bendigo and Adelaide managing director Mike Hirst said there were pockets in the real estate market that were feeling the downturn to a much greater degree than the market overall.

The bank has taken a very conservative position on a number of commercial properties in northern New South Wales and Queensland.

Yesterday it reported that it had added $14.4 million in specific provisions at June 30 to cover these exposures.

Hirst said the overall credit quality of the bank's loan portfolio was sound. Arrears on the commercial loan book, consumer loans and residential loans have come down this year.

Hirst said this was an effect of the government's stimulus package. People have been using the handout to sort out any unpaid debts.

The bank's total provisions at June 30 were $198.1 million, representing 0.51 per cent of total assets. This has increased from 0.41 per cent in the December half and 0.34 per cent in June last year.