Impaired assets fall, but past due loans prove stubborn

The beginnings of an improvement in credit quality across the banking sector is evident in the comprehensive data on impaired assets - compiled by APRA but published by the RBA - released yesterday.

The ratio of impaired assets to total assets fell to 1.15 per cent in the December 2010 quarter, down from 1.21 per cent in the September quarter, and down from a peak of 1.25 per cent in the first quarter of last year.

Banks still have plenty of new problem loans to sort out, however. The Australian Prudential Regulation Authority put the level of new impaired assets in the December quarter at A$5.6 billion, though this is on the low side given the volume of new bad debts over the previous three years.

While impaired assets improved, the level of loans past due by 90 days or more increased a little in the December quarter, to $12.9 billion.