Loan deferrals ease for CBA
The Commonwealth Bank reported a fall in the number of its loan deferrals with regular customer contact critical in managing this scale back, but the bank acknowledges the setback in Victoria could scuttle this downward trend.
It was an assessment made by the Commonwealth Bank CEO Matt Comyn when the bank announced its full-year results on Wednesday.
The bank will embark on a around round of calls, engaging with 250,000 of its customers over the next two months. It has already sent 250 million personal messages to its customers.
With one quarter of Australians having a loan with the Commonwealth Bank, the bank reported that 8 per cent of its mortgage book has been deferred. The value of mortgage loan deferrals fell 12 per cent to 135,000 with 25 per cent of borrowers making some repayments.
Around 14 per cent of these borrowers are 12 months or more in advance with their mortgage repayments.
Less than 20 per cent of its borrowers that have deferred are from higher risk occupations including retail, airlines and hospitality.
The bank reported that 67 per cent of those borrowers have an LVR of less than 80 per cent.
Morningstar bank analyst Nathan Zaia said that while improving, the bank still has 8 per cent of home loan balances and 15 per cent of business loans deferring payments, equating to $48 billion and $14 billion respectively.
But with around 14 per cent of borrowers a12 months or more in advance with their mortgage repayments and less than 20 per cent of its borrowers that have deferred are from higher risk occupations including retail, airlines and hospitality, Zaia is “confident actual losses will be much less severe”.
Comyn said that it was working with customers to assist them to return to normal as soon as possible.
Part of this strategy was adopting ongoing reviews, regular check in via digital platforms and direct contact with high risk customers.
The bank has also adopted an opt-out process for deferrals via the Netbank app and the option to switch to interest-only loans. Terms could also be extended.
The value of its business loan book deferred fell 31 per cent to 59,000 with 30 per cent of its business borrowers making repayments in full.
About 30 per cent of its business customers are accessing JobKeeper. The value of business loans deferred now represents 15 per cent of the bank’s loan book
While Comyn has a “hopeful disposition” over the outlook beyond the Victorian lockdown, he acknowledges that it is “certainly possible” that the request for loan deferrals could trend upwards as a result of the second lockdown.
In fact, the bank recently received requests from 20,000 people applying for deferrals from Victoria
“It is a situation we continue to watch closely. We actually think New South Wales is performing better than expected,” Comyn said.
The situation could also impact the bank’s $1.5 billion COVID provisioning announced in the early part of the year and again Comyn said the bank will look at revising this provision in September.
According to RFi Group, CBA has performed above the market standards in terms of providing their borrowers support through the pandemic to date.
RFi Group senior analyst Nitish Bhatt said that the bank quick to offer their borrowers a wide range of support to help cope with the pandemic.
The RFi Group research found that CBA’s borrowers were most likely to be satisfied with the initiatives taken by their lender in response to the health pandemic.