Westpac, Anz Gain In Home Loan Race

Westpac Banking Corporation and ANZ Banking Group between them are capturing close to half of new home lending by Australia's banking sector.

For April, ANZ is claiming 25.5 per cent of net banking system growth and Westpac 22.4 per cent, indicating they have the most momentum of the big four banks and are growing largely at the expense of the regional banks.

Australian Prudential Regulation Authority figures show housing loans by banks rose 1.1 per cent in April and are up 12.5 per cent over the previous 12 months. This is in contrast to consistent figures from the Australian Bureau of Statistics and some of the banks' internal estimates over recent months that home lending was falling.

Of the big four banks, ANZ has demonstrated the biggest rise in market share of outstanding loans in the past 12 months, from 13.4 to 14.8 per cent, but it still trails the market leader, Commonwealth Bank of Australia, at 21 per cent (down one percentage point).

Westpac is catching up on CBA with 18.4 per cent. Westpac's managing director, Dr David Morgan, said recently the bank was now writing one in four home loans, having bedded down acquisitions such as Bank of Melbourne and Challenge Bank. A Westpac spokesman said the bank's home loan performance was a result of a ``multi-channel strategy and lowering rates of customer churn".

Banks whose market share has fallen include St George Bank, Bendigo Bank, Bank of Western Australia, National Australia Bank and Suncorp-Metway.

NAB's market share stands at 17.8 per cent, placing it third.

Despite its gains (partly attributable to its distribution venture with Aussie Home Loans), analysts expect ANZ's distant fourth spot to increase the pressure on it either to expand by making a big acquisition or to seek a merger partner.

While a rise of 125 basis points in official interest rates (including 25 in May) has not yet had a dramatic effect on credit growth, analysts are predicting a significant slowdown in the second half of 2000 because of the rises and the loss of the pre-GST draw-forward effect.

Broking firm JB Were & Son said the lending figures highlighted that while there was evidence of the housing credit cycle coming off its peak, ``absolute growth remains solid".

Were notes, however, that the profitability of banks is more sensitive to margins than credit growth rates, with a 0.04 per cent rise in margins offsetting a 1 per cent decline in volume growth.

The recent round of results showed that amid a general continuing fall in interest margins, NAB, for example, increased the margin in its Australia operations from 2.98 to 3.07 per cent.

The performances have meant bank investors have done much better than the overall market, with the ASX banking and finance index up 6.4 per cent compared with the All Ordinaries index's 0.22 per cent fall.

But the banks have already warned of a weakening credit cycle and moves to curtail lending on property.

``We continue to expect significant moderation in credit growth during the second half of calendar 2000, contributed to by rising interest rates (impacting affordability) and completion of pre-GST draw-forward of activity," Were says.

However, ``the more recent narrowing of the cash to bank-bill curve, due to the combined effect of rising official rates and rallying bond prices on the back of weak retail sales and consumer/business confidence data, should assist greater stability/improvement in net interest margins".

Were said the better performers in attracting retail deposits during April were NAB, ANZ and Westpac, while in non-housing loans Westpac, St George Bank and ANZ led the charge.

For the year to April, deposits were up 5.7 per cent.

Non-housing loans were up 12.9 per cent over the same period, outstripping the 12.5 per cent growth in housing loans.