LENDING & CREDIT, RETAIL BANKING | Staff Reporter, Australia

Australian banks grapple with funding gap's historic low of 40% in Q1

Investor loan growth slowed to less than 1%.

The funding gap of Australian banks, as measured by loans not funded by customer deposits, dropped to a historic low of about 40% in Q1, according to a Moody’s report.

Despite the stability of the funding gap for major and regional banks, the measure was widened by a group of small banks and foreign-owned banks operating in Australia, which in aggregate account for 18% of total assets in the banking system.

Meanwhile, deposit funding at the major banks' New Zealand operations increased as they maintained higher deposit-to-loan ratios than those of their parents’ operations.

Also read: Mortgage slowdown to hit Australian bank loans in 2019

“Pricing on deposits declined as slowing credit growth eased banks’ funding needs. Banks' wholesale issuance spreads for three-month tenors, and long-term bond issuance, decreased from previous highs,” the report said.

The moderation of housing loan growth drove a slowdown in overall credit growth. Investor loan growth slowed almost to zero in Q1, which was yet another historical low. Meanwhile, owner-occupier loan growth also eased to less than 6% in Q1 from about 8% as of Q3 2018.

“Tighter underwriting standards reduced the availability of credit, whilst declining housing prices weakened demand for credit, particularly from investors who are especially sensitive to expectations of capital losses and pre-election concerns of over potential tax changes,” Moody’s explained.

Business loan growth picked up, largely at the major banks and foreign-owned banks operating in Australia, reflecting their involvement in funding large businesses.

Do you know more about this story? Contact us anonymously through this link.

Click here to learn about advertising, content sponsorship, events & rountables, custom media solutions, whitepaper writing, sales leads or eDM opportunities with us.

To get a media kit and information on advertising or sponsoring click here.