Bank bosses speak out against property investor rules
Major banks have raked in record-breaking interim profits, but their bosses are unhappy about new property investment rules threatening to slow the golden run.
The big four Australian-owned lenders - ASB, ANZ, BNZ and Westpac - made a combined haul of $2.26 billion in the first half of the financial year.
That was the equivalent of over $12 million a day, or $500 for every man, woman and child in the country for the six months.
With lending growth generally solid but unremarkable, some of the banks' increases were relatively modest.
Even BNZ's headline 28 per cent leap became a more moderate 4.5 per cent after adjusting for swings in the value of finance-related contracts.
One headwind the banks will face in the new financial year is the Reserve Bank's crackdown on property investors.
Investors are a valuable group, with the central bank's records showing they borrowed over $2b in March, or about a third of total mortgage lending.
The central bank is planning to force banks to hold more capital against home loans made to investors, with an update expected in its financial stability report on Wednesday.
Westpac chief executive David McLean said one response might be to reduce the amount of lending to investors.
"The other response would be to adjust the pricing for those types of loans, to get the same return on capital."
McLean said Westpac was unlikely to shoulder any increase in costs itself, as that would reduce its return to shareholders.
ANZ boss David Hisco said the bank was looking at a range of options.
"We're just not that far advanced in our thinking about how it might play out. Obviously, nothing is going to be perfect."
Hisco questioned whether the move would have any impact in cooling the heated Auckland property market.
"You've got 50,000 net immigrants ... half of those end up in Auckland. That's roughly 100 people a day looking for a house," he said.
"So that's probably going to weigh more upon housing activity than anything that targets investors."
Hisco said the central bank needed to look at a range of measures to tackle the problem.
"Certainly I don't envy the Reserve Bank governor and the decisions he has to make."
BNZ chief executive Anthony Healy was similarly skeptical.
"Lack of availability of housing, complexity of consent, lack of builders of scale, and on the demand side, significant migration; those fundamentals, you're not going to impact by putting a capital overlay on investor loans."
Healy said if the Reserve Bank did go ahead with hiking capital requirements, it would come at a cost.
"That will have some pricing implications for the banks, but I don't think it will contribute to a significant slowdown of loans to property investors."
That was because unlike the loan-to-value ratio (LVR) limits imposed in 2013, it was not a "flow" limit with a hard cap, he said.
The LVR rules have led to a major reduction in the volume of loans being written to borrowers with small deposits.
The Reserve Bank's crackdown on investors has been a long time coming, with the bank originally expected to introduce rules as early as June last year.
Massey University banking expert David Tripe said the move was justified.
"We wouldn't expect it to have a big impact," he said.
"Though of course, it will mean the banks will have that much more capital, and will be that much less at risk if things go wrong."
Tripe said bank profit growth had moderated to a "relatively stable, sustainable" level, and was likely to keep increasing at a similar rate in future.