ANZ National bad loans rise, but book strong
While New Zealand's largest bank ANZ National Bank is expecting bad loan charges to treble this year, it will be off a low base and its first quarterly disclosure statement (GDS) under new banking rules shows its mortgage book has very low levels of bad loans.
Wednesday, July 30th 2008, 5:51AM
by Jenny Ruth
The bank has a further $5.84 billion in mortgages off-balance sheet, generally loans approved but not drawn down.
On Monday, ANZ National chief executive Graham Hodges said total provisions for bad and doubtful debts will rise to about $165 million this year from about $54 million last year.
The GDS shows ANZ's mortgages with loan-to-valuation ratios (LVRs) above 90%, including both drawn down and not drawn down loans, were higher than the other major banks at 13.6% of the portfolio, or $7.46 billion of loans. However, the bank says the valuations it uses for each loan are discounted from registered valuer's assessment. Where it is unable to establish LVRs, ANZ also classes those loans in the above 90% category "to maintain a conservative treatment."
The bank also has 14.4% of its mortgages, or $7.9 billion, with LVRs between 80% and 89%.
An ANZ spokesman says while LVRs are interesting, they can be potentially misleading. "We can have very, very strong borrowers who chose to gear up for tax reasons," he says.
The bank does a lot of business with property investors who use loss attributing qualifying companies (LAQCs) which is why such a relatively high proportion of LVRs are above 80%, he says.
As well as releasing its March GDS under the new Basel II rules, ANZ earlier released its accounts under the old Basel I rules which showed its residential mortgages totalled $52.66 billion. Using Reserve Bank figures as a proxy for the market, ANZ's share of the mortgage market rose to 35.1%, up from 34.8% at December 31.
The ANZ spokesman says the mortgage book under Basel I rules included business loans secured against housing which are now reported as business loans.
While Westpac's March quarter GDS contains similar information to those of the other banks reporting under Basel II rules, rather than putting all the relevant mortgage book information in its note on capital adequacy, it created a separate note called credit risk exposures by asset class.
That showed its mortgage book totalled $31.11 billion at March 31, including $5 billion of loans approved but undrawn, with $407 million of loans in default.
Another note showed the bank had $28.69 billion in mortgage loans neither impaired nor past due, $1.71 billion in loans past due but not impaired and $110 million of impaired loans.
Westpac's LVR breakdown added up to a total mortgage book of $30.51 billion at March 31. David Osborne, Westpac's head of finance, business banking and risk, says that figure is almost comparable with the figures for residential mortgages the bank reported under the Basel I rules.
Again using Reserve Bank figures, that indicates Westpac's share of the mortgage market rose slightly to 20.3% from 20.2% in December.
The LVR breakdown shows Westpac had $1.58 billion in loans with LVRs above 90%, or about 5.2% of its mortgage book. A further $6.47 billion, or 21.2%, had LVRs above 80%.
Bank of New Zealand won't start reporting under the new rules until the September quarter, having only received Reserve Bank accreditation to report under what's known as "the Basel II internal ratings-based approach for credit risk," the same rules under which the other major banks are already reporting.
Its March quarter GDS shows a mortgage book of $25.32 billion, putting its mortgage market share at 16.9%, down slightly from 17% at the end of December.
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