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The CEO of Commonwealth Bank cautioned to be wary of any resurgence in speculative borrowing by property investors, although lending standards are still strong.
CBA reported first-quarter profits of $2.4 billion last week, and CEO Matt Comyn said the bank had more than $10 billion in surplus capital, according to a report by The Sydney Morning Herald. With the bank’s profits spiking from the housing boom, Comyn downplayed concerns about the market overheating by stressing the differences between the current market and the last housing boom.
Comyn said CBA was seeing strong demand from first-home buyers and owner-occupiers. He said the current red-hot market didn’t concern the bank – but that could change if investor lending ramped up, the Herald reported.
“Where it would become more concerning was if it was becoming concentrated in certain markets, more investor-driven, more speculation-driven, versus very clear incentives that are in place for good reasons to attract first-home buyers to the market,” he said. “We think credit quality, credit standards across the industry, are not deteriorating, and we don’t expect them to. If credit growth starts to accelerate rapidly combined with investor lending increasing, that would certainly give cause for concern, but we revisit all of our settings and go through all of the detail about what we’re seeing every month.”
Recent data showed a 12.7% rise in new property investor loans in March, while new lending to first-home buyers fell for the second straight month, the Herald reported. Comyn said that CBA had seen an uptick in investor loan applications, and that the bank was “watching very closely on a targeted basis,” because this was a risk factor.
However, Comyn said that the fiscal stimulus unveiled in the federal budget last week – particularly the extension of business tax breaks – would support a further rise in business investment.
Read more: Commonwealth Bank reports big profits, driven by lending
“We’ve seen a marked increase in … business activity and business investment probably over the last six months, but in the last three as well,” he said. “We think this is going to continue to drive that.”
Comyn said that CBA was “very positive” on the economic recovery and praised the government’s stimulus, saying Australia could afford the extra public debt.
“The cost from that debt is much less than the cost from high and persistent unemployment, not just financially but also socially,” he said.
Ryan Smith is currently an executive editor at Key Media, where he started as a journalist in 2013. He has since he worked his way up to managing editor and is now an executive editor. He edits content for several B2B publications across the U.S., Canada, Australia, and New Zealand. He also writes feature content for trade publications for the insurance and mortgage industries.
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