Borrow
Credit losses set to triple
The fallout from the COVID-19 pandemic could lead to a material rise in defaults on mortgages in Australia, a rating agency has said.

Credit losses set to triple
The fallout from the COVID-19 pandemic could lead to a material rise in defaults on mortgages in Australia, a rating agency has said.

According to a “Scenario and Sensitivity” analysis from S&P Global Ratings, credit losses across Australia’s banks are set to “more than triple” in the 2020 calendar year in response to the economic fallout from the COVID-10 pandemic.
S&P’s base case is for credit losses across Australia’s banks to rise from 0.14 per cent in 2019 to 0.5 per cent in 2020.
“A contracting economy in the short term, rising unemployment and depressed consumer and business sentiment in the wake of the coronavirus outbreak would drive an increase in credit losses for Australian banks,” S&P noted.
According to the rating agency, business loans would contribute to most of the increase in credit losses for Australian banks, with the tourism, transportation and retail services sectors likely to be severely impacted by the COVID-19 outbreak.
S&P Global Ratings agency believes households will also feel some pain, stating that it expects defaults from households to rise due to income loss.
The federal government and the Reserve Bank of Australia have concentrated most of their efforts to kickstart the economy on the business sector, providing low-cost credit and cash flow support to affected businesses.
Banks have also rolled out loan relief packages for both businesses and mortgage customers, which include options to freeze repayments for up to six months.
Despite forecasting a material increase in credit losses over the medium term, S&P said it expects defaults to the banks to “remain broadly in line” with its expected long-term average, with the ratings agency forecasting a “strong rebound” in the Australian economy at the back end of 2020.
About the author

About the author


Banking
ANZ sued for allegedly misleading customers
The corporate regulator has commenced civil proceedings in Federal Court. ...Read more

Banking
Banks report $14.4bn profit amid pressure on net interest margins
Australia’s major banks have reported a significant boost to their bottom lines and returns in the first half of the 2022 financial year, signaling sector-wide resilience despite persistent pressure...Read more

Banking
Major banks report rising profits
NAB and ANZ announced their half-year results this week. ...Read more

Banking
Modernisation of direct debit system suffers setback
According to the Reserve Bank (RBA), several major banks will not be able to meet the current timeline for the launch of the PayTo service. ...Read more

Banking
Australians' trust in digital providers has decreased in last five years
Australians have little trust in organisations keeping their information secure, but the financial services industry still sits atop the list. ...Read more

Banking
Commonwealth Bank chairman to retire in August
The Commonwealth Bank (CBA) board has announced a successor. ...Read more

Banking
Westpac responds to $113m penalty
The big four bank has responded to the penalty handed down last week. ...Read more

Banking
Westpac ordered to pay $113m for ‘widespread compliance failures’
Westpac has been ordered to pay penalties in the amount of $113 million for widespread compliance failures across multiple businesses, including Westpac’s banking, superannuation, wealth management ...Read more

Wrapping up an eventful 2021
Listen now

What Omicron means for property, and are units right for first-time buyers? What is equity crowdfunding? Are industry super funds tapping into member funds to save their skins?
Listen now

Will housing affordability improve in 2022? Will buy now, pay later become the norm? Why are Aussies staying in failing super products?
Listen now

Who really benefits from crypto ETFs? How will the RBA respond to rising inflation? Could a mandate help address unpaid super?
Listen now

Banking
ANZ sued for allegedly misleading customers
The corporate regulator has commenced civil proceedings in Federal Court. ...Read more

Banking
Banks report $14.4bn profit amid pressure on net interest margins
Australia’s major banks have reported a significant boost to their bottom lines and returns in the first half of the 2022 financial year, signaling sector-wide resilience despite persistent pressure...Read more

Banking
Major banks report rising profits
NAB and ANZ announced their half-year results this week. ...Read more

Banking
Modernisation of direct debit system suffers setback
According to the Reserve Bank (RBA), several major banks will not be able to meet the current timeline for the launch of the PayTo service. ...Read more

Banking
Australians' trust in digital providers has decreased in last five years
Australians have little trust in organisations keeping their information secure, but the financial services industry still sits atop the list. ...Read more

Banking
Commonwealth Bank chairman to retire in August
The Commonwealth Bank (CBA) board has announced a successor. ...Read more

Banking
Westpac responds to $113m penalty
The big four bank has responded to the penalty handed down last week. ...Read more

Banking
Westpac ordered to pay $113m for ‘widespread compliance failures’
Westpac has been ordered to pay penalties in the amount of $113 million for widespread compliance failures across multiple businesses, including Westpac’s banking, superannuation, wealth management ...Read more