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04-11-2014, 07:35 AM
Cooling measures unnecessary, says Kelly
THE AUSTRALIAN NOVEMBER 04, 2014 12:00AM
Michael Bennet
Reporter
Sydney
WESTPAC chief Gail Kelly has played down the likelihood of regulators imposing big-bang “macro prudential” measures to cool the investor-led property boom, saying the banks recently passed a system-wide stress test without alarm.
After previously losing market share in mortgages, Westpac’s Australian Financial Services division, which houses its retail bank, St George and sub-brands such as Bank of Melbourne, boosted its cash earnings 12 per cent to $5 billion.
In the second half, AFS added mortgages in line with “system”, or the broader market, stemming the market share bleed in the past two six-month periods when it grew at 0.7 times and 0.9 times, respectively.
Mrs Kelly lauded the achievement as part of broader growth plans, proclaiming the bank in the past six months grew “at or above” system in all of its key product lines, including credit cards, business loans and deposits.
As it is the biggest lender to housing investors at about 44 per cent of its book, analysts have warned that Westpac is the most exposed to macro prudential rules to cool the Sydney and Melbourne property booms.
The Reserve Bank and Australian Prudential Regulation Authority are discussing options after labelling the market “unbalanced” because of the rise in concentration risk in Sydney and Melbourne as almost 50 per cent of new mortgages go to investors.
While experts expect APRA to force the banks to hold more capital against investor loans, Mrs Kelly said the regulator preferred not to intervene and had a strong supervisory record that had held the nation in good stead.
She added that APRA was already softly taking action such as new guidelines for mortgage lending, ensuring boards were alert to the risks and doing stress tests.
“I think they’d like to stop at that set of tools rather than start to intervene with additional policies that actually can be quite distorting,” she said.
“If you go about setting floors or changing parameters, you actually can drive unintended consequences.
“APRA have just recently done a detailed review across the sector of our housing portfolios and that came up well for the Australian system.”
New Zealand last year capped the banks’ lending to borrowers with deposits of less than 20 per cent, but Mrs Kelly said it had the unintended consequence of hurting first-home buyers. APRA and the RBA are also against capping low deposit lending.
Echoing other senior bankers such as ANZ’s Phil Chronican, Mrs Kelly said the relatively high level of mortgage lending to investors in Australia was driven by the tax system, including incentives such as negative gearing.
She said Westpac’s investors were typically affluent, older borrowers and the 90-day delinquency profile of its investor book performed better than the bank’s overall portfolio.
Ahead of the Reserve Bank’s meeting today, Mrs Kelly said interest rates would stay flat for the “foreseeable future”.
THE AUSTRALIAN NOVEMBER 04, 2014 12:00AM
Michael Bennet
Reporter
Sydney
WESTPAC chief Gail Kelly has played down the likelihood of regulators imposing big-bang “macro prudential” measures to cool the investor-led property boom, saying the banks recently passed a system-wide stress test without alarm.
After previously losing market share in mortgages, Westpac’s Australian Financial Services division, which houses its retail bank, St George and sub-brands such as Bank of Melbourne, boosted its cash earnings 12 per cent to $5 billion.
In the second half, AFS added mortgages in line with “system”, or the broader market, stemming the market share bleed in the past two six-month periods when it grew at 0.7 times and 0.9 times, respectively.
Mrs Kelly lauded the achievement as part of broader growth plans, proclaiming the bank in the past six months grew “at or above” system in all of its key product lines, including credit cards, business loans and deposits.
As it is the biggest lender to housing investors at about 44 per cent of its book, analysts have warned that Westpac is the most exposed to macro prudential rules to cool the Sydney and Melbourne property booms.
The Reserve Bank and Australian Prudential Regulation Authority are discussing options after labelling the market “unbalanced” because of the rise in concentration risk in Sydney and Melbourne as almost 50 per cent of new mortgages go to investors.
While experts expect APRA to force the banks to hold more capital against investor loans, Mrs Kelly said the regulator preferred not to intervene and had a strong supervisory record that had held the nation in good stead.
She added that APRA was already softly taking action such as new guidelines for mortgage lending, ensuring boards were alert to the risks and doing stress tests.
“I think they’d like to stop at that set of tools rather than start to intervene with additional policies that actually can be quite distorting,” she said.
“If you go about setting floors or changing parameters, you actually can drive unintended consequences.
“APRA have just recently done a detailed review across the sector of our housing portfolios and that came up well for the Australian system.”
New Zealand last year capped the banks’ lending to borrowers with deposits of less than 20 per cent, but Mrs Kelly said it had the unintended consequence of hurting first-home buyers. APRA and the RBA are also against capping low deposit lending.
Echoing other senior bankers such as ANZ’s Phil Chronican, Mrs Kelly said the relatively high level of mortgage lending to investors in Australia was driven by the tax system, including incentives such as negative gearing.
She said Westpac’s investors were typically affluent, older borrowers and the 90-day delinquency profile of its investor book performed better than the bank’s overall portfolio.
Ahead of the Reserve Bank’s meeting today, Mrs Kelly said interest rates would stay flat for the “foreseeable future”.