ASX banking sector analysis: April housing loan growth in focus

Growth, always more growth

In this article we look at the latest housing loan growth data for the big four banks – ANZ, CBA, WBC, and NAB, as well as Australia’s two key regional banks – BEN, and BOQ.

Covid-19 was a system shock to Australia’s economy, property market and banking complex. Employment nosedived, the banks were forced to book billions in loan loss provisions and the property market stalled. In retrospect, it’s easy to say that things were never going to stay that way, but at the time the outlook was deeply uncertain.

Since the depths of the pandemic Australia’s employment figures have steadily improved, the banks moderated their provisions, and the property market came back to life and continues to notch up solid growth, a fact well reflected in the loan books of the country’s banks.

Share prices across the sector have also improved dramatically in the last year. In that period, the ANZ share price is up 57%, CBA has climbed 56%, WBC has gained 52% and NAB has risen 49%. By comparison, the regional banks have outperformed their big four counterparts in terms of share price gains over the last year – with BEN up 61% and BOQ up 68% in that period.

Despite that relatively consistent share price performance, from a loan growth perspective, things are less even. As such, below we unpack some of the key loan growth statistics from April, on a bank to bank basis. Data sourced from the RBA, APRA and Morgan Stanley, with one year housing loan growth data in part based on Morgan Stanley estimates.

The big four banks

The big four banks recorded average housing loan growth of 4.8% against aone-year housing loan growth rate of 3.5%. Summarising the recent performance of the big four, Morgan Stanley analysts said:

‘CBA continues to win share; NAB and WBC are improving but still below system; and ANZ's growth turned negative.’

Australia and New Zealand Banking Group (ANZ)

ANZ was the laggard of the big four banks in April, recording negative one-month annualised housing loan growth of -0.7% in that period. That marks a sharp departure from ANZ's one-year housing loan growth levels, which stand at 6.7%.

Morgan Stanley analysts said this was one of the reasons that they recently downgraded the bank, while making the somewhat ominous point that 'Unless ANZ quickly regains momentum, there is downside risk to our 2H21E annualised Australian housing loan growth forecast of +5%.’

Commonwealth Bank of Australia (CBA)

Australia’s largest bank and public company again demonstrated why it trades at a premium to its big four peers, in April booking one-month annualised housing loan growth of 7.6%, representing the highest growth rate of the big four banks.

That also compares favourably to the bank's three-month annualised housing loan growth rate and one-year housing loan growth rate, which stands at 6.8% and 5.5%, respectively. Speaking more broadly of the bank, Morgan Stanley analysts said:

‘Our expectations are high, which means its housing loan growth is tracking broadly in line with our 2H21E forecast of +7%.’

Westpac Banking Corporation (WBC)

Westpac’s April home loan growth rate came in just above the big four average, with the bank's one-month annualised housing loan growth hitting 4.9%.

That's well ahead of the bank's one-year housing loan growth rate, which stood at just 1.2% at the time of writing. Morgan Stanley expects WBC's total housing loans to hit $456.9 billion by the close of fiscal 2021.

National Australia Bank (NAB)

NAB's April home lending growth came in ahead of the majors growth average but below system, with the bank’s one-month annualised housing loan growth hitting 5.1%. That marks an improvement for the business-focused bank against its three-month annualised housing loan growth rate which stood at 4.0%. It's also a significant jump from the bank’s one-year housing loan growth figures, where NAB notched up growth of just 0.5%.

Despite that, Morgan Stanley expects NAB's total housing loan exposure to hit $305.7 billion by the close of the fiscal year, while also making the following observation:

‘While NAB recently stated that it is "building momentum" in retail banking, we're not convinced that growth will match system in 2H21 given ongoing market share loss in investor lending Bendigo and Adelaide Bank (BEN).’

Regional banks

Overall, regional bank home loan growth far outpaced the big four banks in percentage terms during April. Further out, Morgan Stanley is predicting total housing loans exposure of $52.6 billion for BEN and $33.3 billion for BOQ – by the close of FY21.

Bendigo and Adelaide Bank (BEN)

In April, Bendigo bank notched up impressive growth, reporting one-month annualised housing loan growth of 12.9% – the highest of Australia's six large-cap banks. Interestingly that is slightly below the bank's one-year housing loan growth rate, which stands at 13.8%.

Bank of Queensland (BOQ)

Like Bendigo Bank, the Bank of Queensland notched up impressive loan growth in April, recording annualised housing loan growth of 12.3%, well ahead of the big four banks in the same period. That April growth tracks well against BOQ's one-year housing loan growth rate of 6.3%, as well.

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