The Bank of Queensland’s latest Pillar 3 report, released yesterday, shows the credit quality of the bank’s residential mortgage portfolio improved over the three months to the end of November.

The value of impaired loans in the A$60.2 billion book fell 11.7 per cent over the three months to $212 million, arrears were down 5.6 per cent to $251 million and specific provisions were down 5 per cent to $37 million.

The bank’s APRA general reserve for credit losses remained steady at $177 million.

The BOQ figures indicate that the positive credit quality trend identified by APRA in the September quarter has continued.

APRA said the credit quality of ADIs’ residential mortgage portfolio improved during the September quarter. Non-performing loans (overdue by 90 days or more) as a proportion of total owner-occupier outstandings declined from 78 basis points in the June quarter to 71 bps in the September quarter. Non-performing investment loans fell from 75 bps to 67 bps over the period.

APRA said the effect of the increases in the cash rates since May had most likely not yet been fully reflected in variable rates due to a lag in transmission of cash rate increases to mortgage rates.

“It is expected, however, that this effect will eventually be fully reflected in rates leading to a subsequent deterioration in asset quality,” it said.