Westpac has reported inaccurate mortgage book numbers for three years

Westpac has revealed it has provided a distorted breakdown of its mortgage book since its merger with St George bank in late 2008.

On the final day of trading of 2011 the bank revised down its proportion of owner-occupier loans from $198.6 billion to $165.2 billion while revising up its proportion of investment loans from $88.6 billion to $116.8 billion.

The revisions relate to “legacy” adjustments following the bank acquiring St George bank in December 2008.

The revisions include changes to St George lending figures dating from November 2008 to February 2011 while Westpac revisions apply from November 2008 to October 2011.

The error was revealed following an internal review and means that monthly banking figures provided by APRA dating back to November 2008 have been incorrect for three years.

In a statement Westpac said the changes would have no impact on its published financial statements and financial position.

However, some banking analysts have questioned whether the restatement indicates a poorer-quality loan book.

Westpac says it might ake additional changes to its data “should it identify further opportunities for enhancement and alignment”.

The restatement comes as APRA prepares to issue the final version of its prudential standard covering capital adequacy requirements in mid-2012 in line with Basel II banking reforms and follows Australia’s big four banks having their long-term credit rating downgraded by Standard & Poor’s at the start of December 2011.

Westpac says the revisions will not have any material impact on its risk profile, with a spokesperson saying the risk “relates to the individual, not the property”.

“The real risk in the mortgage is whether people can continue to pay or not. We lend based on people's capacity to repay."

The bank blames the error on borrowers using equity generated in their homes to buy investment property.

The bank was also revised down the size of loans to financial corporations from $10.1 billion to $11.3 billion, while liabilities to clearing houses and financial institutions were revised down from $6.2 billion to $5.2 billion.

Other revisions included lowering the bank's holding of trading securities from $51.1 billion to $32.2 billion, while raising the value of its investment in security holdings from $70.1 billion to $90.2 billion.

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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