Mounting loan arrears an industry-wide problem

Queries over asset quality in banking must be mounting, as evidence builds of a decided drift in the level of problem loans.

Moody's Investors Service added to the evidence pile yesterday with a quarterly appraisal of arrears on car and truck loans.

"The performance of Australian auto loan asset-backed securities deteriorated in the June 2015 quarter," Moody's said.

It said delinquencies of 30 days or more rose to 1.47 per cent in June 2015 from 1.24 per cent in March and from 1.10 per cent in June 2014.

The worsening in loan quality bucks recent trends.

Moody's said that "since 2010, arrears performance in the second quarter of every year typically remained stable or improved from the first quarter, because by the second quarter, delinquent borrowers have usually caught up on their payments," following any increase in arrears after a slack summer.

"By contrast, in this year's second quarter, delinquencies climbed across all auto loan ABS programs," Moody's said.

These arrears levels in themselves may be low, but the recent round of bank trading updates and financial year reporting produced a string of pointers to a shift to higher levels of impairment expense."