Bank loan books hit by LVR limits

23:40, May 28 2014

Six months of mortgage restrictions have taken their toll on the big banks' lending books.

The latest bank disclosure statements, for the March quarter, mark half a year since the Reserve Bank introduced its "speed limits" on high loan-to-value ratio (LVR) lending.

All the banks' exposure to the riskier lending has dropped dramatically over the period, though some have felt the pain more than others.

The country's biggest bank, ANZ, lost the largest chunk in absolute terms, with $1.5 billion less than it had prior to the new rules.

On a proportionate basis, its high-LVR loanbook also shrank at the highest rate of 3.4 percentage points.

Earlier this month, ANZ chief executive David Hisco said he was happy with the bank's figures and the fact it had honoured all its commitments.

"Because we didn't cancel anything, we managed to sail through with people thinking we were open for business," he said.

The other factor that could inflate the proportionate change is a rise in low-LVR lending, and Hisco said sub-80 per cent loans had "gone up nicely".

Kiwibank was in the middle of the pack, with its portfolio of above 80 per cent LVR loans falling by 2 percentage points, or $111 million.

ASB was previously one of the most aggressive high-LVR lenders and even had to scrap some customers' pre-approved loans.

However, it made it through the first six months with a reduction of just $465m, or 1.5 percentage points.

Westpac NZ shrank by the same amount on a proportionate basis, and suffered the lowest absolute reduction of $324m.

As at March 31 ASB still had the highest overall exposure to high-LVR mortgages, at 22 per cent of its total book, followed by Westpac (21.3 per cent) and ANZ (19.4 per cent).

The Bank of New Zealand's conservative exposure of 15.3 per cent reduced to 12.8 per cent. In absolute terms, its high-LVR loan book shrank by $671m, the second biggest decline.

Earlier this month, outgoing chief executive Andrew Thorburn confirmed the bank was "well under" the Reserve Bank's limit.

The latest statistics from the Reserve Bank show high-LVR lending across all the banks was steady in April at $254m. On a proportionate basis, it rose to 5.4 per cent, as overall lending declined.

The central bank has said the restrictions will remain in place till late this year at the earliest.

Correction: An earlier version of this story incorrectly said Kiwibank had been most strongly affected by the LVR rules, and that its proportion of high-LVR loans dropped 4 percentage points, or $421m, between September and March. The correct figure is 2 percentage points, or $111m. We regret the error.