Home Loans Pay Off For Advance

Aggressive home lending helped Advance Bank Australia overcome a steep rise in problem loans to lift net profit 28 per cent to $18.2 million in the November half.

A fully franked interim dividend rises 2c to 13c.

The profit increase, however, is exaggerated due to a change in the bank's accounting policies to exclude proceeds from the sale of properties from after-tax profits.

The change reduced the bank's previously announced profit for the six months to November 30, 1989, by $2.1 million to $14.3 million.

Managing director Mr John Thame said yesterday there had been a strong recovery in home lending in the period.

The bank is lending about $98 million a month for housing. In the November half, home lending rose by 135 per cent to $501 million.

The strong increase was largely responsible for boosting the bank's net interest income by almost 29 per cent to $102.5 million, although there was also some improvement in overall interest rate margins.

Interest revenue rose 2.7 per cent to $493.6 million, while interest expense fell 2.5 per cent to $391.1 million.

But Mr Thame acknowledged the steep lift in the bank's provisions for problem loans, saying "the decline in property values has been a determining factor in the assessment of the level of doubtful debt provisions".

The bank, he said, had "taken a conservative approach to these provisions, increasing specific provisions by $14 million and general provisions by $2.2 million to a total of $16.2 million. Bad debts written off were $1.4 million.

This $17.6 million provision for problem loans is a rise of 300 per cent on the corresponding period last year, in which $4.4 million was allocated.

Of more concern, however, is the sharp rise in the bank's level of non-performing loans (loans on which interest is not being paid). These stood at $83.2 million at the end of November 1990. According to the bank's assistant general manager, communications, Mr Arthur Delbridge, "we virtually had none at the same time last year".

Mr Delbridge said the bank had not made any provision for its exposure of about $30 million to the collapsed property developer Girvan's Northbeach Parkroyal Hotel in Wollongong. The bank, he said, was "not in any doubt on that one".