(July 30): National Australia Bank (NAB) said on Thursday domestic home-loan applications fell 15% in the June quarter while early signs of stress appeared in business lending, with pressure strongest in sectors exposed to the conflict in the Middle East.
The decline follows capital gains tax and negative-gearing reforms aimed at boosting new housing supply, changes that analysts expect to further cool the property market, with home prices easing across most capital cities and auction clearance rates at their lowest since the pandemic.
Last month, Westpac, Australia's second-largest lender, also flagged a 10% decline in mortgage applications since the reforms.
At NAB's Business and Private Banking (B&PB) division, home lending balances increased 2% over the quarter, while business lending grew 4%.
Pressure builds under the surface
The country's top business lender said watch loans in its B&PB division rose 8% from the prior quarter, reflecting what it described as current and potential impacts from a challenging operating environment.
The rise adds to signs that geopolitical risks are feeding into parts of Australia's economy, with banks closely watching industries exposed to trade flows, freight costs and supply-chain disruptions.
"Watch loans are the earliest rung on the credit-stress ladder, so an 8% quarterly rise shouldn't be dismissed: it tells you NAB's bankers are seeing more customers under strain or at risk of strain," said David Tuckwell, CIO at ETF Shares.
The lender said asset-quality pressure remained most evident in construction, transport and storage, which it linked to the effects of the conflict in the Middle East on trade flows, freight costs and supply chains.
NAB said the ratio of non-performing loans to gross loans and acceptances in its B&PB division improved to 2.91% at June-end from 3.00% at March-end.
"The fact that impaired loans improved in the same quarter suggests the tail of genuinely bad loans is being worked out, even as the bank proactively moves more names onto the watch list," Tuckwell said.
Shares of the lender pared early gains to trade 0.4% higher by 0056 GMT, while the broader ASX200 benchmark index was down 0.6%.
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