Suncorp Bank is making a long-term shift away from lending to customers with small deposits, which it hopes will limit the impact of an inevitable rise in interest rates.
With regulators pressuring banks not to cut credit standards amid fierce competition for customers, new chief executive John Nesbitt said on Thursday the bank was trying to be a ''wise, calm head in a pretty hot market''.
Suncorp, Australia's fifth-largest bank, has recently made a significant cut in its writing of new mortgages with loan-to-valuation ratios of 90 per cent and Mr Nesbitt said it was being careful about loans with loan valuation ratios between 80 and 90 per cent.
At the same time, the bank is focused on writing more loans with loan-valuation ratios below 80 per cent, where Mr Nesbitt said the major banks and Macquarie had been enjoying a ''feeding frenzy''.
Mr Nesbitt, who was appointed to run the bank late last year, said the changes were part of a strategy to achieve growth in key markets without taking excessive risks.
''We're particularly mindful that where the market is sitting today, you've got a low interest rate environment, it's inevitable, given global markets and where the Australian yield curve is positioned, that rates are going to go up,'' he said in an interview.
''So you've got to be careful to make sure that the people who you are lending money to can afford to repay it, so their serviceability capability is in the right spot, and importantly the collateral that sits behind their loans is of a order that is going to protect you if things get tough.
''We've focused on moving out of the high [loan-valuation ratio] and into the lower ratios].''
He said he expected other banks to adopt a similar approach to lending to people with deposits of less than 10 per cent.
Figures this week showed a lower share of loans being written with loan-value ratios above 90 per cent, but strong growth in the 80 to 90 per cent range.
Mr Nesbitt's comments come after several months of slower loan growth for Suncorp, which has a loan book of $50 billion.
The slowing was due to the cut in higher-risk lending, he said, which was part of a long-term plan to build up the quality of its loan book.
Regulators have repeatedly told banks not to drop their credit standards in an environment of cheap credit and rising house prices, and Mr Nesbitt said Australian Prudential Regulation Authority chairman John Laker had been ''very vocal'' in his warnings.
The focus on lower-risk lending comes as the bank tries to finally focus on growth after last year offloading its ''bad bank'', which housed commercial property and corporate loans that went bad in the global financial crisis.
Author : Clancy YeatesSource : Sydney Morning Herald
Lower-risk lending accompanies a focus on growth. Photo: Craig Abraham
- Major banks control broker loans, says non-major
- Bank of Queensland settles dispute valuation dispute with Landmark White Brisbane; Suncorp believed to be in separate $19m windfall
- FCA urged to put more pressure on Clydesdale review
- ASIC needs a ‘big stick’: Kell
- APRA thinking hard on financial system inquiry bank recommendations