Tag: Monthly Banking Stats

APRA released the monthly banking statistics to end January 2019, and they show a further moderation in home finance lending to both owner occupiers and investors. In fact investment lending balances fell a little.

Its worth highlighting these are raw numbers, no seasonal adjustment, and are based on the returns sent from the banks (possibly data is late thanks to the holidays?).

Nevertheless, it appears to show the credit impulse continues to slow, and this will translate into further home price falls ahead.

Overall the value of home lending from the banks rose 0.15% in the month, to $1.67 trillion dollars. This be be equivalent to an annual rate of just 1.8%. This is the lowest growth rate for years. Within that lending for owner occupation rose by 0.27% to $1.11 trillion dollars and lending for investment purposes FELL 0.09% to $557 billion. Investment loans comprise 33.37% of all loans on book.

We can track the growth rates by category. Overall growth rates continue to fall across the board.

The individual movements within the banks makes interesting reading, with all the large banks seeing their investment lending pools shrinking, while Macquarie, HSBC and Bendigo/Adelaide Bank, plus AMP are taking up the slack. We hope they have adequate underwriting standards in place!

The portfolio movements remain pretty much the same, with CBA the largest owner occupied lender, and Westpac the largest investment loan lender.

Whilst the 10% APRA speed cap is obsolete now, the annual movements show that the majors are well off the pace compared with some of the smaller lenders, and the market grew (based on monthly averages) by just 0.73%, with below zero growth rates in 4 of the past 12 months.

The investment lending party is well and truly over, but the hangover, in terms of big loans, interest only loans, and falling returns will be with us for years. The credit impulse is dying – prices will continue to fall as lending standards are normalised. Lets be clear, freely available credit inflated home prices, the reverse is also true. Short of breaking the responsible lending rules again, there is no way out.

APRA released their monthly banking statistics to end December 2018 today. Total loan stock for housing was $1.67 trillion dollars, up 0.23% from last month (equivalent to 2.8% if annualized). Another record.

Within that loans for owner occupied housing rose to $1.11 trillion dollars, up 0.33% from November, or $3.7 billion dollars, while investment loans rose $173 million. Overall investment loans fell to 33.45% of portfolio.

The movements show a steady decline in owner occupied loans, and a slight rebound in investor loans, from a very low base.

Looking at the banks’ portfolio movements, we see significant variations in strategy, with Westpac and CBA still lending, especially on owner occupied loans, alongside ING, HSBC and Members Equity. But NAB and ANZ have slowed their growth, and in fact dropped their share of investment loans a little in December.

That said the portfolio moves are at the margin, with CBA and Westpac maintaining their leading positions in owner occupied and investment loans respectability.

For completeness, we show the growth in investor loans by lender, despite the APRA speed limit is now removed. Macquarie holds the prize for portfolio growth. Investor loan growth has slowed to a crawl.

Finally, we can estimate the relative growth of the banks and non-banks by combining the RBA and APRA data. It is approximate, but clear the non-banks are growing their portfolios faster than the ADI’s because although they have the same responsible lending rules, they are not constrained by APRA’s capital rules.

It is clear the non-banks, growing on an annualized 16.9% basis for owner occupied loans and 3.06% for investment loans are taking up the slack. But this should be a warning to regulators, as risks here are rising, as households who fail the stricter bank underwriting standards turn to the non-banks; even if they have to pay a higher rate of interest!

APRA needs to wake up, on this one. In fact the story is one of loan flow being deflected away from the big four, to some smaller banks, and non-banks. It will be interesting to see if the Royal Commission report changes the game when it is released.

APRA belatedly released their monthly banking statistics to the end of November today. Only a couple of days after the month end, but then who’s counting… (I am!!)

These statistics give us the monthly stock of assets and liabilities by the banks, and as normal we will focus in on the residential mortgage section of the data. We can of course compare this data with that from the RBA, which did come out on the last working day of December, and which we already discussed. See The Debt Machine Is Alive And Well

According to APRA, the original mortgage loan portfolios for the banks rose by 0.344%, or $5.69 billion over the month to a new record of $1.664 trillion dollars. Within that, owner occupied loans rose by 0.5% or $5.5 billion dollars to $1.1 trillion dollars, while loans for property investment rose 0.034%, or $188 million to $557.6 billion. 33.52% of all loans are for investment purposes, and this continues to slide, given the new market conditions.

The monthly trend tracker highlights that owner occupied loans are growing significantly faster than investment loans.

Looking at the monthly portfolio movements among the banks, we see that among the big four, Westpac and ANZ saw a significant fall in the value of their investment loan portfolio, while CBA and NAB grew theirs. Macquarie continues to stand out as a lender writing a significant share of investment loans. CBA wrote the largest share of owner occupied loans, and we also see ING also focussing on owner occupied loans.

Overall, the banks portfolios are only moving at the margin, with CBA maintaining its position as the largest owner occupied lender, and Westpac the largest investor lender.

One other interesting (if obsolete) view is the relative growth in investor lending over the past 12 months. This was a focus of APRA but of course is now not being actively used as a control tool. Nevertheless, the data shows that AMP and Macquarie stand out with the largest portfolio growth, to November, while some of the majors are now in negative territory, including ANZ and CBA. Bendigo and Adelaide Bank are writing a greater relative share than the majors now. The market average across the year (sum of the monthly movements now stands at 1.14%. What a difference from a couple of years ago, APRA’s macroprudential intervention has certainly had an effect, despite being several years too late!).

One final data point, we can estimate the relative share of non-bank lending by comparing the RBA data and the APRA data. As discussed before this is tricky, given the delays in the non-bank data, and the fact that not all the non-banks are included in the dataset. That said, we can use the DFA tracker to show the relative movement between the banks and non-banks.

This makes interesting reading, and underscores that fact that the non-banks have been growing faster than the ADI’s in recent times. Non-Bank owner occupied annual lending is running at around 15.6% compared with a year ago, while investor lending grew around 1.9%. This compares with the market average from the RBA of 0.9% for investor lending and 6.4% for owner occupied lending. Its fair to conclude therefore than non-banks are lending like fury, compared with the ADI’s, a symptom of easy non-bank funding, different capital requirements, and a greater willingness to lead.

This is a sure sign of more trouble ahead, as we know that some borrowers rejected by the banks, because of their not meeting the tighter lending standards now in force are being swept up by the non-banks, where they often will pay a higher mortgage rate! This is something I discussed with Tony Locantro in our recent video – from first hand experience!.