ANZ Bank prepares for ‘second wave’ of distress in 2021
While there were currently low numbers of companies being wound up, or individuals facing financial strife, he said this was because government support and banks’ temporary loan deferrals had bought time.
Mr Elliott said one concession was that interest rates were very low, which meant it was less costly for the bank and borrowers to defer their loans temporarily. “We can afford to buy time. We can afford to be a bit more sensitive than we might not otherwise be,” he said.
ANZ group executive for Australian retail and commercial banking Mark Hand said the bank was planning on the assumption that more businesses would need to assess their viability after the Christmas trading period.
“We expect our small business [clients] to come in a second wave, effectively, where we need to have those in-depth conversations next year,” Mr Hand said.
With the bank forecasting house price falls of up to 15 per cent, Mr Hand was asked if this meant ANZ would limit loan-to-valuation ratios (LVRs) in Melbourne.
Mr Hand responded that the 15 per cent fall forecast was a “worst case scenario” but it would impose LVR limits on some postcodes, and there were parts of the country where it would not lend more than 80 per cent of a property’s sale price. He said for some luxury properties it would limit LVRs on new loans to 70 per cent.
After the Victorian state government on Sunday extended its lockdown of Melbourne by two weeks, Jefferies banking analyst Brian Johnson said this was another setback for the economy. Mr Johnson predicted a “fairly” hefty rise in the banks’ bad debt provisions, and said deferring loans in the long-term would slow down growth.
“It’s a horrible position to be in. Deferring a home loan might ease the initial pain, but it slows down future growth, and perhaps you end up having an economy that looks a bit like a zombie,” Mr Johnson said.
Meanwhile, Bell Potter analyst TS Lim said the last thing banks wanted to do was foreclose, but added that markets were expecting substantially higher bad debt provisions from the Australian banks. “I think probably the worst has been priced in. All the analysts have a lot of bad debts coming through from now until next year,” Mr Lim said.