CommSec margin lending near record

Investors seem encouraged the stock market may have bottomed, with CommSec recording a near record month in May for margin loans and margin loan drawings, according to Brian Phelps, head of investment lending at CommSec.

"What happened in the period around December, January, February, a lot of clients sold a number of their positions down and took their gearing from levels around 60 per cent to 40 per cent.

"Since then some clients have seen opportunity.

"Certainly May indicated a lot of people had a bit more confidence and started to get back in again, and that was based around the fact that our book overall was only geared at around 38 per cent.

"Our book is traditionally geared around the 40 per cent mark."

Phelps adds around 30 per cent of CommSec clients will be rolling their one-year fixed margin loan in the last weeks of June.

In total, 36 per cent of CommSec clients use fixed margin loans.

David Curry, general manager margin lending at St George, said the bank is currently receiving strong inflows of new business, with fewer investors fixing positions.

"We are definitely seeing a slower take-up of where we would normally be with people rolling over their fixed positions.

"We are probably going to see a high proportion of people simply roll to a variable loan."

Curry said individual stock loan to value ratios are constantly reviewed and changed accordingly, but individual collateral levels have not increased.

"Our basic terms and conditions haven't changed; we continue to operate in the same manner.

"We have not made any wholesale changes to LVR's or buffers, it's more looking at individual stocks and understanding their volatility - then changing loan to value ratios as we see fit."

Curry said the St George margin lending book lending ratio has ranged in the high thirty per cent to the low forty per cent.

"The overall LVR (for St George) has trended up in the last six months, but only by a few percentage points. But we are still in comfortable territory in the low forties.

"Our overall balance sheet is in the region of $2.6 billion at the moment."