Westpac reins in low-equity loans
Westpac is continuing to rein in its low-equity lending, with its latest disclosure statement suggesting it will easily meet the Reserve Bank's new rules.
Since October, all banks have been restricted to loaning no more than 10 per cent of their new mortgages to high-LVR (loan-to-value ratio) borrowers.
Westpac's mortgage lending rose by 1.4 per cent in the September quarter, or $525 million, but that growth was driven by loans to borrowers who had equity of at least 20 per cent.
The bank's high-LVR lending dropped by $60m, or 0.7 per cent.
The Reserve Bank signalled its intentions to introduce the new rules months in advance, giving banks plenty of time to prepare for the new regime.
Westpac started pulling back from the high LVR sector at the beginning of the year, while some of its rivals continued to lend heavily.
Both ASB and Kiwibank would probably have breached the new home-loan rules if they had been in force during the last quarter.
Bank disclosure statements do not exactly track lending flows, but give some indication of how behaviours are changing.
ASB grew its high-LVR loans by about $230m, representing 40 per cent of its overall new lending growth of $581m, potentially putting it well over the limit.
Chief executive Barbara Chapman has previously said growth in the lower-LVR category was higher than it appeared on paper, but was masked by the number of people repaying loans.
Kiwibank's new high-LVR lending was more restrained at $34m, accounting for 15 per cent of its overall mortgage growth.
ASB, BNZ and Westpac have all struggled with a backlog of pre-approved loans, and have slashed the time customers have to find a property before their pre-approval expires.
In the worst-case scenario, breaching the lending rules could see a bank lose its registration.
Kiwibank has already been in breach of its conditions of registration since June, when the resignation of a board member meant it no longer had enough independent directors.
Kiwibank's disclosure statement said the Reserve Bank was still considering whether to take any action, and that a process for fixing the problem was under way.
The state-owned bank reported a $26m first-quarter profit, down 13 per cent on the same period last year.
Interest income dropped slightly, although the bank's mortgage book grew by a healthy 1.9 per cent, or $234m.
Australian-owned ASB posted a $204m profit for the three months to September 30, up 15 per cent.
Revenues rose 11 per cent, while its mortgage book grew by 1.4 per cent.
ANZ, BNZ and Westpac follow a different financial year, and have already reported results to the end of September.