NAB provisioning for increased mortgage risks

author-avatar By on May 06, 2021
NAB provisioning for increased mortgage risks

In its latest half-year earnings report, National Australia Bank flagged an increase in provisions off the back of mortgage risks.

Compared to March 2020, NAB's March 2021 half-year results showed an increase in collective provisions by 18.4% to $808 million.

According to NAB's report, net collective provisions consisted of $588 million "raised for targeted sectors impacted by COVID-19 including aviation, tourism, hospitality, entertainment, retail trade, commercial property and higher risk mortgages."

However, provisions are down compared to September 2020's half-year report, with the big four bank seeing improvements in mortgage and lending delinquencies. 

On Tuesday, APRA deputy chair John Lonsdale said there was no evidence of a decline in lending standards.

In the quarter to December 2020, the prudential regulator reported that "LVRs greater than or equal to 80% increas[ed] to 42% in the December 2020 quarter from 39.9%, likely reflective of an increase in first-home buyer activity".

The same report also showed loans with debt-to-income ratios above 6-times increased 0.9 percentage points to 17.2% over the same period.

NAB chief executive Ross McEwen said a part of the economic recovery lies in the success of the vaccine rollout.

"The recovery is not even, and some customers such as those in international travel and hospitality, particularly in CBD areas, still face significant challenges," he said.

"Longer term outcomes for these customers depend on a number of factors expected to become clearer in coming months. These include the impact of JobKeeper ending, timing of the vaccine rollout, and the reopening of international borders." 

Moody's Investors Service vice president Frank Mirenzi said NAB's overall results were a positive.

"Australia’s strong economic recovery, which is building momentum for loan growth, underlines a more positive outlook for revenue growth in the second half," he said.

"A very strong capital position, along with large loan loss reserves, reflects the strength of the balance sheet even as the risk of bad loans begins to recede.”

Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. If products listed have an LVR <80%, they will be clearly identified in the product name along with the specific LVR. The product and rate must be clearly published on the Product Provider’s web site. Monthly repayments were calculated based on the selected products’ advertised rates, applied to a $400,000 loan with a 30-year loan term.

Term deposits lose steam

Total customer deposits also increased 1.6% since September 2020 to $475.8 million, and NAB says this was largely due to "government and central bank stimulus measures in response to COVID-19". 

"On demand deposits" or savings accounts increased by $4.6 billion compared to September, offset by term deposits falling by $3.2 billion.

Approximately $500 million extra worth of customer deposits earned no interest compared to September 2020.

Below you can compare a range of big four bank term deposits.


Photo by CDC on Unsplash

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author-avatar
Harrison joined Savings in 2020. He is an experienced journalist, with previous stints at News Corp and financial comparison site Canstar. With a keen interest in personal finance, Harrison is passionate about helping consumers make more informed financial decisions.

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