Regional lender Bendigo and Adelaide Bank has reported a sharp rise in non-performing and past-due loans in the March quarter, at the same time as actual write-offs of bad loans fell in the same three months.
In a filing with the ASX on Friday evening — well after trading had finished at 4pm — the bank revealed a 33% jump in impaired and past-due loans in the March quarter, from the levels reported at the end of December.
These were for housing loans and other retail loans.
In the filing made at 7:13pm (also past the early deadlines for Saturday papers), Bendigo said its impaired and past due loans for housing mortgages and other retail amounted to $465.5 million at March 30, up from $351.3 million.
Impaired housing loans jumped from $19.380 million at the end of December 2008 to $26.895 million at the end of March, an increase of 38%.
Impaired “other retail” loans ballooned from $80.06 million to $130.13 million at the end of March, a sizeable jump of 62%.
“Past Due’ mortgages jumped from $189.46 million to $222.09 million, a rise of 17% in the three months to March.
But “Past Due” other retail loans more than doubled to $130.13 million at the end of March, from $63.44 million at the end of December. In percentage terms it was a rise of 105%.
In its first Financial Stability review of the year in March, the Reserve Bank said, “as at December 2008, non-performing housing loans accounted for 0.48 per cent of Australian banks’ outstanding on-balance sheet housing loans, compared to 0.32 per cent a year earlier.”
Bendigo’s total of impaired and past-due housing loans was $248.99 million at the end of March, or 1.1% of total housing loans of $22.511 billion. That compared with a share of 0.1% of total loans (or $208.8 million) of $22.85 billion at the December.
But that wasn’t as bad as the share impaired and past due “other retail loans” had of total retail loans.
The bank said that at the end of December impaired and past due other retail loans totalled $143.4 million, or 1.6% of total loans of $8.421 billion. At the end of March that had jumped sharply to $216 million, or 2.3% of other retail loans totalling $9.381 billion.
Bendigo Bank said on Friday that the “movements in arrears and provisions for the March quarter are in line with forecasts previously provided to the market.”
But the details in the filing were prepared for the March quarter, well before Grat Southern, the management investment scheme, collapsed, putting in doubt $615 million in loans that thousands of clients of Bendigo Bank have with the failed company. The majority of those clients were picked up in the acquisition of Adelaide Bank by Bendigo.
Reports in the The Age and the Sydney Morning Herald today detail losses in some of Bendigo’s community banks, but not the losses declared to the market on Friday night.
It’s clear from the figures that ‘other retail’ applies to the mounting losses in some of Bendigo’s community banks.
Bendigo said it had a general reserve for credit losses of just over $105.7 million at March 31 ($103.5 million at December 31). With up to $451 million in housing and other retail loans either impaired or past due, that’s not much leeway for further write-offs.
Nor does Bendigo have much leeway to handle any losses that may occur in the Great Southern loans, especially if some customers choose bankruptcy instead of repayment.
Despite the sharp rise in impaired and past due mortgage and other retail loans in the March quarter, actual charges to specific provisions and write-offs fell to $11.6 billion for those two categories (and $2.6 billion or all other categories of loans) at March 31, from $16.4 million for housing and other retail loans (and $3.86 million in other loans) at December 31.
Dear Glenn,
Lots of great figures in this article, but what is the punchline? Is the point that Bendigo Bank is close to collapse? If so, what are the consequences?
Reading this story left me with a feeling of “so what?” While I’m sure the financial boffins out there are drawing their own conclusions, the rest of your readership is left feeling vaguely uncomfortable, like they’re the only ones at the table who missed the joke.
So please, dear Glenn, remember your average reader when writing on all things financial and consider the ‘so what’ factor!
Cheers
Alison
Very well put Allison.
My eyes began to glaze over half way through that article.
Glen, perhaps you could give Possum a call and arrange for him to whip up some spiffy graphs. I’ve read your piece about 4 times now, and I’m still confused as to what the real world ramifications are for the bank.
BTW
Is it just me, or is there some confusion with billions and millions in that last para?