Tight APRA reins could hit bank profits

by Maya Breen16 Mar 2015
Bank profitability could be impacted as the Australian Prudential Regulation Authority warns banks on tougher capital requirements. 

According to The Australian Financial Review bank investors can expect the potential for tougher action from financial regulators as they tighten up on lending.

The AFR reported NAB has been the leader in investor lending growth recently and the Commonwealth Bank of Australia would be impacted the most by a crackdown on loans with very long terms.

While APRA has not said what action it is taking on investor lending, analysts believe it will slow credit growth and revenue.

Watermark Funds Management investment analyst Omkar Joshi told AFR the increased pressure from APRA  was "negative" for the sector as it would slow future revenue growth in an environment when banks also faced tighter margins.

"You will see revenue growth start to slow down, probably not in the May results of Westpac, ANZ and NAB, but later in the year you will start to see an impact," Mr Joshi told the AFR.

The banks expect APRA to provide feedback to them after March on whether any changes are needed in the second quarter.

Joshi told The AFR there were signs that APRA's actions were having an impact, with new loan approvals falling 0.6 per cent in January, Australian Bureau of Statistics figures showed.


 
 

COMMENTS

  • by Chris C 16/03/2015 10:57:17 AM

    The majors continue to offer short 2-3 year terms on their business and commercial property loans that after this term require the borrower to pay another loan fee to extend the same loan and sometimes another revaluation fee/s that together can cost thousands for the same loan. The customer has no real safety net on a term of loan supporting their business or property investment that they used to get 10-15 years for. 2nd tier Banks continue to offer 10-15 year terms AND provide up to 5 years fixed AND provide better fixed & variable rates AND with no ongoing fees ie. complete contrasts to the majors that cry poor (whilst they enjoy huge /record profits), I will continue placing my customers with the 2nd tier banks. Its best for the customer on price AND also for their security of investment / tenure.

  • by Really? 16/03/2015 11:32:12 AM

    Yea lets reduce lending apra....despite the fact that the Feds say our economic recovery will be led by the home building industry (and its the only economic activity not in decline). Pity all the government entities cant get together & decide on one direction for the country.