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Tuesday, 9 May 2017

Westpac mortgage profiles

Earnings season

Westpac reported cash earnings of $4.017 billion in 1H17, up 3 per cent (statutory net profit was up 6 per cent), equating to cash return on equity (ROE) of 14 per cent. 

Looking at the residential sector, mortgage delinquencies 90 days past due have increased sharply in Western Australia, while generally remaining steady elsewhere. 


Source (ASX: WBC)

APRA-defined investor loan growth was tracking at 6.4 per cent, some way under the arbitrary 10 per cent speed limit.

The results announcement and investor pack together run to hundreds of pages, but this was probably the most interesting slide, where Westpac takes a look at the profile of its interest-only loan books. 


Source: (ASX: WBC)

The slide posits that only a small percentage (2 per cent) of interest-only lending is for borrowers with less than a 20 per cent deposit and with gross income of under $100,000.

The figures do show, however, that the group has some work to do to bring the flow of new interest-only lending into line with APRA's new designated limits

Moreover, it should also be noted that 20 per cent deposits may be refinanced out of other investment properties rather than being drawn from cash savings, while gross income can include rental income, so the dynamic might not be as robust as it first appears.