Bank results showed an uptick in some mortgage arrears,but bad debts remained low overall.Credit:Wolter Peeters
An expected increase in bad debts is one of the key risks on the radar for bank investors. Markets are betting that rising interest rates will ultimately hit bank profits,by causing an increase in defaults by struggling households and businesses.
But although it is early days,this month’s round of major bank profit results showed little change in the proportion of customers struggling with repayments,while suggesting many consumers still had large savings buffers to draw on.
In the six months to March,several banks showed a small increase in customers missing a repayment,but in the case of lending giant Westpac,90-day mortgage delinquencies edged down.
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Across the big four,PwC analysis found that provisions for bad debts climbed by 6.1 per cent in the half,compared with a year earlier. It said the major banks had a total of more than $20 billion in provisions set aside for credit losses.
But PwC said the credit provisions were more a reflection of the banks’ expectations that the economy will deteriorate,as opposed to actual cases banks saw of customers falling into stress.
Managing director at White Funds Management Angus Gluskie said the pain from rising interest rates was bound to hit borrowers eventually but,so far,there were few signs of it in banks’ results.