A non-major bank has celebrated just 5% of its customers who originally were put on loan deferral needing to extend the arrangement beyond the initial assistance period.
Heritage Bank CEO Peter Lock contrasted the group’s result with the 35% of loan deferrals at the country's seven largest banks which remain ongoing, a figure yesterday released from the Australian Banking Association (ABA); according to the ABA data, deferrals across the seven have dropped from 803,000 at the peak of the pandemic to 280,000 now.
Lock said the “extremely low” rate of ongoing deferrals at Heritage speaks to the high quality of its loan book.
“We take our responsible lending obligations very seriously, and our arrears rates traditionally sit at around one third of the industry average, so we know the credit quality of our customer base is very strong,” he explained.
“We had a total of only 2,150 loans on COVID-related hardship provisions, which in itself is a very small percentage of our book.”
“To now have just 5% of those loans still on hardship assistance is a little unexpected but very welcome.”
According to the CEO, many of the bank’s customers who pursued hardship arrangements earlier this year ended up being in a better position than they realised.
“While interest rates dropped markedly in the last 12 months, many of our home loan customers did not reduce their repayments, so they actually got ahead of what was required,” Lock said.
“In fact, more than 70% of our home loan customers were at least one monthly repayment ahead, with many ahead by much more. That provided some breathing space to absorb the COVID impacts.”
Further, some customers seem to have sought loan deferrals preemptively, expecting to face COVID-related stress, but then were able to continue meeting their commitments.
“They’ve been prudent in seeking help, but have now found they can manage. That’s a great result for everyone,” Lock said.
However, the CEO did stress that while the current figures are welcomed, the bank is aware government assistance packages have protected many Australians from yet feeling the full impacts of the COVID downturn.
“When that assistance is removed, we will need to closely monitor the repercussions,” Lock finished.