ANZ.NZX - Anyone holding?

[Snoopy]

Possibly a result of increased restrictions around home loan lending?

Could be Biscuit. The thing is though, if it has become harder to get a mortgage, this might imply that those that no longer qualify for a mortgage would go for an 'other retail' loan. So on balance 'other retail' might be expected to be riskier for FY2016 than FY2015. Yet the risk for 'other retail' loans has fallen as well! One explanation is that those denied a mortgage have moved to a different lending institution. So ANZ has got risk off the books by losing those customers. But if that had happened, one might expect the 'non mortgage' retail loan book to shrink.

Go back to my post 362 on this thread and you will see that overall ANZ.NZ loans for 'Personal & Other Lending' have gone from $85,202m (FY2015) to $87,719m (FY2016). That is an increase of 3.0%. If people roll over their houses , on average, every seven years and house price inflation is 21%, then one might expect an increase of 21/7 = a 3% increase in the residential Mortgage book per year. If house price inflation is not that high (and nationwide I don't think it is) , one could infer that more 'non mortgage' retail lending is going on. IOW, ANZ are increasing the size of their 'non mortgage' retail loan book. Yet the 'other retail' loan risk is falling?

I am having trouble making sense of it all. Just as well I am not a banker in 'real life'.

SNOOPY

[Biscuit]

I am having trouble making sense of it all. Just as well I am not a banker in 'real life'.

SNOOPY

Your attempts to make sense of it are very admirable, personally I would not dare try.

[Biscuit]

... if it has become harder to get a mortgage, this might imply that those that no longer qualify for a mortgage would go for an 'other retail' loan....
SNOOPY

I'd think two things at least would happen as LVR restrictions were introduced and increased: 1. people who were about to be locked out, stepped up and took out a mortgage before the rules changed; and 2. people who were locked out dug deeper for longer (or hit on their parents) to achieve the new ratios. Both effects probably have improved the margin of safety on new loans over time and the margin of safety on old loans gets steadily larger over time with house inflation and principle reduction.

[Snoopy]

I'd think two things at least would happen as LVR restrictions were introduced and increased: 1. people who were about to be locked out, stepped up and took out a mortgage before the rules changed; and 2. people who were locked out dug deeper for longer (or hit on their parents) to achieve the new ratios. Both effects probably have improved the margin of safety on new loans over time and the margin of safety on old loans gets steadily larger over time with house inflation...

Yes, excellent point Biscuit. Because most mortages are not rolled over in any one year, house price inflation actually pays a large part in reducing risks for banks on the 6/7 (or so) of mortages that are not rolled over. I hadn't considered the point before that house price inflation is really good for trading banks, assuming of course that any possible subsequent house price collapse level also increases with the overall level of house price inflation.

and principle reduction.

LOL, I find that statement very amusing! I am going to assume this is a spelling error and you meant 'principal'. Because if you actually meant 'principle reduction', that means you are saying that as house prices increase, then the lenders become less scrupulous with shareholder funds and more inclined to accept lies from their lying 'borrowing customers' about their ability to repay the loan!

SNOOPY

[Biscuit]

LOL, I find that statement very amusing! I am going to assume this is a spelling error and you meant 'principal'. Because if you actually meant 'principle reduction', that means you are saying that as house prices increase, then the lenders become less scrupulous with shareholder funds and more inclined to accept lies from their lying 'borrowing customers' about their ability to repay the loan! SNOOPY

Well spotted. I did indeed mean principal reduction, although logically the longer a customer has successfully serviced a loan the more inclined the bank should be to view them as lower risk? So, maybe I am right either way?