CBA arrears rise but home loan book continues to grow slowly

CBA arrears rise but home loan book continues to grow slowly
CBA arrears rise but home loan book continues to grow slowly

Commonwealth Bank's loan book has grown over the March quarter in line with their forecasts, but their arrears have grown too, in the continued fallout of the mining boom end.

There are 0.71 percent of mortgage holders who are over 90 days behind on their repayments, according to Commonwealth Bank's latest quarterly results. 

CBA arrears rise but home loan book continues to grow slowly

"Consumer arrears were impacted by seasonal factors in the quarter and continued to trend higher from a low base, influenced by subdued levels of income growth and cost of living challenges, most pronounced in outer metropolitan areas of Perth, Melbourne and Sydney," Commonwealth Bank advised.

The end of the mining boom still seems to be felt by the nation's biggest lender. 

Accounts in negative equity represent just over three percent of total accounts, with around 75 percent of that figure relating to Western Australia and Queensland.

Despite the rise in arrears, Commonwealth Bank's loan book continues to grow, a further 2.5% over the March quarter against the December quarter.

CBA arrears rise but home loan book continues to grow slowly

It was slower growth however from the December quarter where there were 4% more home loans taken.

CBA saw their profits plunge over the March quarter 2019, with customer compensation costing them around $714 million.

Profits drop by 28 percent $1.7 billion over the quarter.

Compensation payments and the administrative costs have now hit $2.17 billion.

Chief executive Matt Comyn said the bank are quickly making amends. 

“We are committed to improving outcomes for our customers, addressing past failings and compensating customers quickly," Comyn said.

"The additional $714m in pre-tax customer remediation provisions taken in the quarter demonstrates this commitment, and builds on a range of other initiatives to achieve better customer outcomes, including removing and reducing fees for our customers.

"We continue to make progress on our strategy to become a simpler, better bank.

"While headline profitability was impacted by higher remediation provisions, our sound business fundamentals ensure we remain well-placed in a challenging environment, highlighted in this quarter by volume growth in our core businesses, a strong capital position and continued balance sheet strength.”

March quarter results across the big four banks had their holes.

Most of the focus has been the shift away from interest-only loans.

ANZ have trimmed their loan book to now have just 18% interest only home loans, compared to NAB, who as well as CBA saw their profits drop, have an unhealthier 26% of their loan book given to interest only loans.

Late last week ANZ were the final big four bank to cut their rates in this cycle.

 

 

Joel Robinson

Joel Robinson

Joel Robinson is a property journalist based in Sydney. Joel has been writing about the residential real estate market for the last five years, specializing in market trends and the economics and finance behind buying and selling real estate.

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