Having prepared for a worst-case scenario, the major banks suddenly find themselves in the middle of an economic recovery with bad debt write-offs nowhere near what was previously estimated.
The big four had made provisions for $17.7bn in bad debt. The figure is, in fact, likely to be closer to $9.6bn, leaving the majors with $8.1bn to write back into their businesses, according to a report by stockbroker BBY.
The multibillion-dollar windfall could be used to pay special dividends to investors. It would also boost the banks' lending power, however, further consolidating their grip on the mortgage industry. BBY downplayed the possibility of the banks using the money for more mergers with smaller players, citing increased regulatory hurdles.
A spokesperson for ANZ told The Australian that although the rise in bad debts was easing, the economy was still fragile and the bank would be acting very cautiously. "We have uncertainty about the shape of the recovery and the potential for higher levels of capital required by regulators," he said.