Housing growth slows for major banks as COVID restrictions drag on
The banking industry is starting to feel the pinch from the ongoing COVID-19 lockdowns, according to a recent note from Macquarie.
Housing growth for the major banks – excluding the troubled ANZ Bank business – slowed to 6%-7% in July from double-digit annualised growth the month before, The Australian reported.
“While the full impact of the current lockdown will not be known for some time, we expect balance sheet growth to dampen in the fourth quarter of this year and potentially in the first quarter of 2022,” Macquarie said in the note. “However, if property prices continue to rise, the likely pent-up demand may result in a better outlook for 2022 credit growth.”
Data released last week showed that despite the ongoing lockdowns, the economy was relatively strong in the June quarter, growing by 0.7%, The Australian reported. Growth had slowed significantly from 1.8% the previous quarter, but was still a long way from some economists’ warnings of a contraction.
The Australian Bureau of Statistics said that domestic demand explained the result, with household spending, private investment and public expenditure all reporting solid numbers, offsetting a drop in mining export volumes.
Michael Smedes, ABS head of national accounts, said the lockdowns had “minimal impact on domestic demand, with fewer lockdown days and the prolonged stay-at-home orders in NSW only commencing later in the quarter.”
Housing growth trends have narrowed in recent months, The Australian reported. Macquarie said that ANZ was the key outlier, as its performance continued to deteriorate.
The bank’s mortgage growth trailed its peers by about 4% in the last six months, The Australian reported. However, management said that ANZ “hasn’t used the price lever to chase share for the sake of it.”
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Macquarie said ANZ’s margin performance in the second half of FY21 would be key.
“If ANZ’s revenue materially lags peers, we believe the current loss of market share may turn out to be costly for shareholders,” Macquarie said.
Banks continue to hold plenty of liquidity after drawdowns from the Reserve Bank of Australia’s term funding facility in June, The Australian reported. However, it seems as though deposit pricing benefits have run their course.
“As observed in the recent bank reporting season, the outlook for the major banks’ deposit mix benefits has diminished,” Macquarie said. “If competitive pressures persist, bank margins are likely to disappoint relative to expectations.”
