Tag: Monthly Banking Stats

Today is a big data day, with the monthly banking statistics from APRA and the financial aggregates from the RBA for July. Total credit grew by 0.4% in July, with Housing lifting by 0.5%, Personal Credit at 0.2% and Business Lending at 0.3%. In the last year, overall credit rose 5.1%, Housing 6.5%, Personal Credit 0.8% and Business 3.4%.

Looking in more detail at home lending, we see that overall lending was up to $1.382 billion, from $1,375  billion in June. Owner Occupied Lending rose by $3.5 billion and Investor Lending rose by 3.6 billion. This equates to an annual rise of 4.8% for Owner Occupied loans and 8.5% for Investment loans.

The proportion of Investment loans from ADI’s rose again to 34.9% of all their housing loans, the largest monthly share ever. From an overall market perspective, a little below 34% of all loans written were for investment purposes.

The relative growth in Owner Occupied versus Investment loans is quite stark. Also of note is that growth in both types of loan appears to be slowing recently.

Turning to the banking statistics from APRA, total home lending from the banks was $1,273 billion (the gap between this and the RBA numbers of $109 billion is the non-bank sector).  CBA continues to lead the pack on Owner Occupied loans, whilst Westpac leads on Investment loans.

Looking at the share figures, of the main players, CBA and Westpac have the largest footprints and between them have more than half the market.

Portfolio movements highlights significant Investment Loan grow at Westpac, and both types of loan at CBA. Away from the majors, Macquarie and Member Equity Bank grew faster than the other regional players.

Turning to deposits, the total with banks rose to $1,736 billion, up 1.2% in the month. Westpac, nab and ANZ lifted the value of deposits more than Westpac in July.

Finally, in the cards portfolios, the overall value fell by $270 million in July to $40.3 billion.  In terms of the portfolio, CBA continues to hold the largest share by value, with Westpac and ANZ following.

 

The ABS published their housing finance data today to June 2014. In seasonally adjusted terms, the total value of dwelling finance commitments excluding alterations and additions rose 1.0%. The value of commitments grew faster than the number of transaction, so the average loan size is increasing.

Growth in NSW, WA and TAS was faster than the national average.

We see the momentum spread across the states, with WA and NSW making the largest growth contribution. VIC and QLD grew more slowly.

First time buyers are still at historic lows. In original terms, the number of first home buyer commitments as a percentage of total owner occupied housing finance commitments rose to 13.2% in June 2014 from 12.6% in May 2014.

State variations are quite marked. NSW has the lowest proportion of first time buyers, WA the highest. The VIC data shows the impact the removal of some first time buyer incentives in 2013.

Investors loans grew faster than owner occupied loans. This is consistent with the results from our household research.

The splits, after removing refinance of existing loans are 47% investment loans and 53% owner occupied loans.

So, momentum continues, the trends are set, growth in the investment sector, first time buyers excluded, and overall growth stimulated by rising prices. The RBA quarterly statement on monetary policy, issued today, indicates they are  comfortable with the current position:

One area where there has been a marked improvement is dwelling investment, which grew strongly in the March quarter and is clearly in an upswing. The increase in dwelling investment is being underpinned by the ongoing strength in the established housing market. Housing price inflation over 2014 to date has not been as rapid as it was over the second half of 2013, but prices continue to rise. Loan approvals are higher than they were a year ago, but have been little changed since late last year. At this level, they are consistent with growth in housing credit stabilising at a rate that is a bit faster than income growth, although the growth of investor credit has continued to outpace that of owner-occupiers. The high rate of housing price inflation has underpinned strong growth in standard measures of household wealth. Along with the very low level of interest rates, this has seen consumption growing a little faster than household income, leading to a gradual decline in the saving rate over the past 18 months or so. Nevertheless, after picking up through 2013, consumption growth looks to have slowed in the first half of this year, with weaker retail sales growth and consumer sentiment falling to below-average levels. It remains to be seen whether this slower growth of consumption is temporary. Indeed, a timely measure of consumer sentiment has rebounded recently to be back above average.

I am less sure, because we are banking on larger loans supporting the growth in house prices, despite record low interest rates, and a significant rise in investment loans. There are risks in this scenario.

The RBA published their financial aggregates to June 2014, and rounds outs the picture we discussed yesterday. Looking at lending aggregates first, we see investor housing moved up 8.7% in the 12 months to June 2014, whilst owner occupied lending grew over the same period by 5.3%, thus, combined, housing grew 6.4% in the past year. Business lending grew, but was boosted by the provision of bridging loan facilities associated with the re-structure of a domestic corporate entity, and personal credit was up by 3.5% over the last 12 months.

We can show the monthly data, which highlights how housing lending has been moving. The growth in investment lending is clear.

Turning to the value lent, housing lending reached a new record, $1.375 trillion.

Looking at the split between owner occupied and investment lending, the stronger growth on the investment side is again clear,

and is at a new record of 33.73% of all housing loans outstanding.

Looking at how the banks are funding this lending growth, we see overall growth in deposit growth slowing

and overseas funding rising.

The continued growth in investment lending will drive house prices higher, and bloat the bank’s balance sheets, but is not economically sustainable. Ever greater leverage into the housing sector remains a concern. That said, data from our latest household surveys, just in, highlights that investors are getting a second wind, so more growth in likely. Updated survey results will be released next week.

APRA published their monthly banking statistics for June 2014 yesterday. This is a snapshot of the bank’s total books by category. Momentum continues in the housing sector, with owner occupied lending up 0.7% and investment lending up 1.2% in the month, and totalling $1.266 trillion. Looking at the trend since January, we see the majors still sitting in their familiar positions, and we note the momentum at ING and Macquarie also.

Looking in detail at the relative share in June, CBA has more than 27% of owner occupied lending, and Westpac nearly 32% of investment loans.

Looking at the movements, month on month in value terms, we see Westpac grew their investment lending most strongly, CBA grew both owner occupied lending and investment lending, whilst nab focused more on owner occupied lending. Macquarie is writing both owner occupied and investment loans. Bendigo is more focused on owner occupied lending.  Members Equity appears to be loosing a little from their owner occupied loans.

Turning to Credit Card Loans, balances rose 0.2% in the month (after a fall last month), at $40.6 billion. CBA still leads the pack, and we continue to see ANZ and Citi shrinking their portfolios. Macquarie, as we highlighted previously picked up an additional portfolio last month.

Finally, if we look at deposits, balances grew at 0.64% in the month, to $1.72 trillion. Not much change in the relative positioning of the banks.

However, it is worth noting that nab balances fell in the month, ANZ rose a little, whereas CBA and Westpac had stronger $5billion plus uplifts.

Finally, loans grew faster than deposits in the month, and the gap in funding is drawn from the financial markets, where spreads have dropped significantly, more than 65 basis points in some cases from 12 months ago. This is why we are seeing deposit rates falling, as we highlighted recently and savers are looking for yield elsewhere.

Later we will look at the RBA data, which includes the non-bank sector to round out the monthly analysis.

The ABS today published their data series on Lending Finance in Australia to May 2014. The seasonably adjusted value for owner occupation fell 0.7% compared with April, whilst overall commercial lending fell 6.0% month on month. There were increases in personal finance and leasing, but overall lending fell. We start with a chart showing the trend growth in seasonally adjusted terms from January 2010. Remember that commercial lending includes investment housing.

25% of loans were for housing owner occupation, 13% were for personal finance (both revolving and fixed term loans), and 61% were commercial loans.

So now we separate out the share of investment loans from commercial lending, and we see the growth has stalled.

This is more striking when we look at the percentage splits. About 25% of all commercial lending is for investment housing purposes.

Turning to housing lending, we see that this has also stalled in May. The growth in the “others” category, includes self-managed superannuation investors, though it is still a relatively small proportion of all lending.

Looking at the splits, investment housing accounted for 39% of loans, 4% of which are for other entities, including SMSF’s. Refinancing accounted for 18% of lending, and 33% was for the purchase of established dwellings.

  Finally, it is worth noting the trend growth in refinancing, households are still looking to lock in the current low rates, and to reduce their monthly repayments where possible.

We hold to our view that momentum is shifting, as we reported recently.

 

Reflecting on the ABS data released today, and already covered here, and putting that into context of our household surveys, we think momentum is changing and the housing sector could stall in coming months. Demand for new finance fell 0.8% in May. Whilst refinancing remains quite buoyant, thanks to low rates, investors appear to be slowing, as already foreshadowed in our surveys.

First time buyers are still at low levels,

and they are still priced out of the market.

The current low interest rates and rising prices have together encouraged households to transact sooner than they might otherwise would, pulling transactions forwards, but this won’t last.

So, if future demand is not coming from first time buyers and investors, where will demand come from? Well, we know there are many households who would like to enter the market, but cannot because prices are too high, these property inactives won’t change their tune anytime soon. Will foreign investors keep the property ship afloat? The problem here is there is little good data on overseas investors, and in any case, is this sensible policy?  The contribution which SMSF investors might make will hardly move the dial.

We also know that unemployment is up, and likely to continue to trend this way, which directly impacts households and mortgage stress. In addition consumer confidence is not that flash.

We think interest rates may be taken down by the RBA later in the year, but lower rates wont bring more households out of the woodwork because the banks won’t relax their serviceability buffers any further.

Putting all this together, it is likely we are at the top, and both house prices and lending will probably reverse later in the year. This creates a massive problem for the RBA who were banking on housing being the economic bridge between the end of the mining boom and the return to growth from other commercial sectors.

We should have implemented policies to stimulate the commercial sector earlier, rather than inflating house prices and the banks balance sheets with unproductive lending. Lending to business returns growth to the economy,  flowing funds to inflated housing does not.

The ABS released their latest housing statistics today. Total ADI lending now tops $1.3 trillion. Investment lending has reached a new high at 33.8% of all loans. The trend estimate for the total value of dwelling finance commitments excluding alterations and additions rose 0.2%. Investment housing commitments rose 0.3% and owner occupied housing commitments rose 0.2%. However, In seasonally adjusted terms, the total value of dwelling finance commitments excluding alterations and additions fell 0.8%.
There were some state variations in owner occupation loans, but in percentage terms there is more noise in the data from the smaller states. NSW, QLD and SA were up from the previous month, whilst VIC and TAS fell month on month.

The proportion of fixed rate loans remain elevated, but off its 20% high in 2013.

First time buyers were slightly higher in May, but still lower than average and close to all time lows.

Investment lending is still a significant factor, with close of 33.8% of lending for investment purposes. This is an all time record for investment lending.

The banks have a greater proportion of investment lending …

compared with credit unions or building societies.

The stock of total ADI housing lending is now above $1.3 trillion in original terms.

Finally, note there is an investigation into the first time buyer data. The ABS advise that in collecting this information, lenders are asked to report all loans to first home buyers. Concerns have been raised that under-reporting could occur if some lenders were only able to accurately report on those buyers receiving a first home buyer grant. Most data on first home buyers are collected by the Australian Prudential Regulation Authority (APRA) under the Financial Sector (Collection of Data) Act 2001. APRA is contacting lenders on behalf of the ABS to investigate whether lenders experience any difficulties reporting on loans to first home buyers. The outcomes from the investigation will be published on the ABS website.