Auswide says lending caps are hurting small banks
BUNDABERG-based Auswide has criticised how lending regulatory caps are impacting small banks, saying they will partially suppress its own loan growth in the next six months.
The comments come as the 23-branch lender reports a rise in profits and dividends.
Auswide accelerated lending in the second half, and its loan book rose 4.01 per cent for the year to $2.773 billion.
That remains off industry averages of 5.4 per cent, according to Reserve Bank of Australia statistics.
But loan growth should slow in the first half followed by a "strong” second half, Auswide managing director Martin Barrett said.
That slowdown was partly linked to Australian Prudential Regulatory Authority caps on investor loans, which should only grow 10 per cent annually, and interest-only loans, which should account for less than 30 per cent of new residential lending.
Mr Barrett said that APRA's caps tended to hit small banks in a "more amplified way”. "It doesn't take much for a smaller bank ... to step across a 10 per cent threshold,” he told The Courier-Mail.
"We are finding it ... quite a challenge to try to manage that,” he said.
The level of refinancing customers could trigger problems, he said.
Any subsequent regulatory changes should be more targeted, he suggested.
APRA declined to comment but small banks including the then QT Mutual have similarly complained about the caps being too blunt a tool.
Auswide profits rose from $11.7 million to $15.1 million - expenses from merger activity in fiscal 2016 were not repeated. On its preferred underlying result, earnings rose from $14 million to $15.6 million.
Investors will get a final dividend of 17c, up from 16c, and customer numbers rose 6 per cent to 84,101. Costs were down, but so were margins from 1.96 per cent to 1.9 per cent.
Margin falls had been the result of historically low interest rates and competition, but Bell Potter analyst TS Lim this should improve as loans are repriced.
The performance of Auswide was improving, Mr Lim said. But Auswide will find it harder stripping out more costs, he predicted.
Auswide is building up in interstate and southeast Queensland markets.
Mr Barrett said in regional Queensland markets had stopped declining but "we're not seeing any meaningful pick-up in terms of home-loan demand”.
One issue was trying to draw people back into regional areas, he said.
Tourist areas such as Cairns were improving and the bank was hoping for greater results from mining-linked markets as commodities markets revive.
Auswide has a 63 per cent stake in start-up online lender Moneyplace. Mr Barrett said arrears there were better than budget at less than 1 per cent.
Moneyplace lost $430,000 in the year and Mr Barrett said there were hopes that it could turn profitable in 18 months.