By Gareth Vaughan
With the mortgage deferral scheme wrapping up at the end of March, the New Zealand Bankers' Association (NZBA) hailed its success against the backdrop of the COVID-19 crisis. So just how are the key home loan banks placed as they move away from this unprecedented measure taken in unprecedented times?
I asked the banks a series of questions about their individual situation. For industry-wide context, NZBA last week said over the past year more than 66,000 household and business loans, with a total value of around $30 billion, were fully deferred. As at the end of February NZBA said there were around 3000 household and business loans still deferred, with a total value of about $1.1 billion, against total household and business lending for banks of about $480 billion.
The individual bank responses are detailed below in alphabetical order, with the questions asked of the banks reproduced at the foot of this article. It's fair to say some banks gave fuller answers to the questions than others.
It should be remembered that whilst the payment deferrals gave financially hit customers some breathing space, interest continued to accrue on their loans during this time.
An ANZ spokeswoman provided a sparse response on behalf of the country's biggest bank. She said much of the detail interest.co.nz requested was "commercially sensitive" and pointed to a post on ANZ's website about the end of the deferral scheme.
The post notes that in total about 16,500 ANZ customers deferred payments on their home and personal loans over the 12 months of the scheme. As of March 24, ANZ had fewer than 700 customers with loan deferrals still in place.
Since the scheme ended on March 31 ANZ says customers needing a loan repayment deferral will be assessed on the criteria used before the Reserve Bank’s concessionary treatment was introduced.
"Customers continue to have rights under consumer laws to ask for changes to their loan if they’re suffering unforeseen hardship, such as the loss of their job," ANZ said.
"Once the concessionary period ends, deferrals will show on a customer’s credit check as the customer being behind in payments. This may impact a customer’s ability to get credit in future."
ANZ said it has other options available to customers having difficulty repaying their loan. These include further relief under a hardship assistance programme involving a further break in payments, extending the loan maturity date to reduce the level of payments but increase the number of them, or moving to interest-only loans for a period.
Mortgagee sales are a last resort, very rare and not in ANZ or customers' interests, the bank said.
"If all other options fail, most home owners choose to sell their property to pay back their loan and protect their equity. The current housing market advantages the customer if they choose to sell their property," ANZ said.
ASB has provided COVID-19-related relief to more than 38,000 personal and business customers since March 2020, totalling more than $15 billion of lending, an ASB spokeswoman says. This included payment deferrals, interest-only payments, term extensions, temporary overdrafts and access to the Government’s Business Finance Guarantee Scheme.
"While it’s pleasing to see 89% of customers who needed support during the pandemic have been able to go back to previous payment arrangements, and that home loan deferrals are now back to pre-COVID-19 levels, we are continuing to provide around 4,200 personal and business customers with ongoing support," the spokeswoman says.
"ASB remains committed to keeping customers in their family homes and the end of the mortgage repayment deferral scheme does not change this. In February this year we made a commitment not to force any sales of owner-occupied family homes for the next 12 months. We have put tailored plans in place for those customers facing financial difficulties and we continue to work with them to get the best outcomes we can for their individual circumstances."
"The end of the mortgage deferral scheme will not change how ASB supports customers; nor we do not expect it to have significant impact on non-performing loan volumes," the ASB spokeswoman says.
A BNZ spokesman says the bank is unable to provide specific figures.
"But the vast majority of our customers, both business and consumer, that used COVID-19 support measures have returned to normal terms. The very small number of customers still requiring assistance are supported by out team on a case by case basis," the BNZ spokesman says.
A Kiwibank spokeswoman said at peak Kiwibank had 6,000 home loan customers on "COVID-19 care options." As the scheme ends, less than 400 remain, comprising either payment deferrals or interest only options.
"The value of lending remaining in care is now approximately $100 million. There are approximately 70 customers that remain on COVID-19 credit card care; down from about 600 at peak. Total balance of credit card care is $400,000. No customers remain on COVID-19 overdraft care, the Kiwibank spokeswoman said.
"In terms of business lending, Kiwibank provided 161 customers with $88.9 million of support through the Business Finance Guarantee loan scheme. There are no business customers currently on a COVID-19 related business assistance offering at Kiwibank. At peak there were 1,039 business customers receiving COVID-19 assistance with lending valued at $13 million. These customers have now transitioned to normal business terms."
What will happen with customers still using the deferral scheme?
"The majority of remaining personal customers have care maturing over the next eight weeks. Most are in a strong position and will be coming off their care arrangement. The small number of customers that require ongoing care will move to normal hardship offerings and processes," the Kiwibank spokeswoman said.
"With the high numbers rolling off the COVID-19 support packages we expect the impact on non-performing loans to be minimal. Kiwibank continues to have very low levels of impaired assets."
In comments attributed to Mark McLean, its general manager for member experience, SBS Bank said at the outset of the COVID-19 crisis it offered a mortgage deferral option as part of a support package for customers affected financially.
Since then McLean said SBS has been in regular contact with customers who've needed a mortgage deferral or some other hardship relief. This has included SBS collaborating with customers before the expiry of their hardship relief to establish if they: were able to resume regular loan repayments; required some further temporary hardship relief; or needed SBS to work with them to discuss alternative strategies to provide for the orderly repayment of their loan.
"The substantial majority of our customers that have needed COVID-19 hardship relief have returned to making regular loan repayments with only 11 customers with loan balances totalling about $3.5 million, or about 0.11% of the Bank’s retail mortgage portfolio, still having a mortgage deferral," McLean said.
"The SBS loan book mostly comprises residential mortgage lending, with smaller portfolios of consumer, agribusiness and commercial, and we do not have any material business banking/SME type loan portfolio. The SBS loan book is performing well with a relatively low level of past due or impaired lending. We do not expect the end of the mortgage deferral scheme to have any material impact on the overall quality of our loan book."
David Cunningham, CEO of The Co-operative Bank, said the bank's peak for mortgage deferrals was 8.5% of customers. This is now down to 0.2%, which is similar to Co-op Bank's pre-COVID level of customers in hardship. Customers still requiring assistance will be managed on an individual basis within the bank's hardship process, Cunningham said.
"The outstanding dollar exposure is negligible. There have been very few extensions of mortgage deferral."
"Similar stats apply to our personal loan portfolio, though most personal loan deferrals were three months whereas mortgages were a mix of three month and six month deferrals. Although not part of the capital relief framework from the Reserve Bank, we approach these customers in a similar way and they are managed individually based on the customers circumstances," Cunningham said.
He added that some customers were managed on an interest-only basis, however they have now reverted back to paying principal and interest in a similar fashion to deferrals.
"Our level of customers on exposure on interest-only term represent 7% of our exposure and this is a similar level to pre-COVID," Cunningham said.
"Credit card deferrals were relatively light, it’s a pretty flexible product anyway, and are back to pre-COVID levels. Arranged overdrafts barely moved over the last year."
Co-op Bank doesn’t offer business lending.
Cunningham said Co-op Bank is now back into business as usual with deferrals part of its standard credit processes.
'[There's] no impact on non-performing loan volumes, as we are back down to normal levels. Therefore [there's] no impact on capital either."
"The Reserve Bank capital relief on mortgages in deferral was excellent policy, rapidly implemented. At Co-op we always had a mortgage deferral framework and were processing an elevated level of deferrals even before the Reserve Bank announced the policy, we just adjusted the approval framework to reflect the Reserve Bank rules. Personal loan deferrals didn’t get a lot of airplay but were just as significant, though with no capital relief," Cunningham said.
"One thing we did at Co-op was look at customer deposit flows in the early months of COVID, eg. regular salary deposit, and proactively contacted loan customers where we could see income had materially dropped. About one in 10 of these calls resulted in a deferral, but 10 out of 10 resulted in a happy customer."
A TSB spokeswoman said as the deferral scheme ended, TSB had just two customers remaining on full repayment deferrals, and 18 customers still on interest-only repayments because of COVID-19.
"Our specialist team is committed to carefully supporting these customers with the best solutions for their individual circumstances going forward," the TSB spokeswoman said.
"Over the last 12 months around 2600 TSB customers took up a mortgage deferral or moved to interest only due to COVID-19, and over this period we’ve worked closely with these customers to support them with their needs and reach this positive outcome, where most no longer need financial assistance."
A Westpac spokesman said fewer than 20 of the bank's home loan customers are still receiving specific COVID-19 mortgage deferral assistance. Westpac continues to work with these customers individually to try to find repayment solutions that work for them.
"Similarly, the vast majority of our nearly 10,000 business customers who originally received COVID-19 lending assistance no longer require any help. Those who do are being helped in different ways by different business teams depending on their situation," the Westpac spokesman said.
The questions interest.co.nz asked the banks last week
1) Can you say what the number of consumer lending customers, who have used the mortgage deferral scheme, remains at, and what their total value of loans is? And how do these figures compare to peak levels last year?
Also, how many consumer customers remain on reduced payments, and what's the total value of lending to them, and how many have all payments deferred and what's the total value of their loans?
And can you provide break-downs for home loans, personal lending, credit cards and arranged overdrafts?
2) In terms of business lending, can you provide the total number of customers and value of loans who are still using the deferral scheme, and break-downs for those on reduced payments and those on deferred payments in terms of customer numbers and value of loans?
Also what's the volume and value of business customers who've had loans restructured?
And are you able to provide break-downs for temporary and term business/corporate lending, stock and equipment finance and arranged overdrafts?
And how do the overall business lending figures compare to peak levels last year?
3) What happens with customers still using the deferral scheme now?
4) And how significant an impact do you expect from the end of the deferral scheme on non-performing loan volumes? And what will this mean for the bank's capital requirements?
Any additional comments welcome.
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