ANZ is gearing up for a busy end to the year and even busier 2021. As the six-month period of automatically granted loan deferrals ends – coinciding with the end of Job Keeper wage subsidies – the bank has begun assessing which borrowers can start making repayments before turning to the borrowers who are in poor shape.
“This is a recession and banks are very busy in recessions,” Mr Hand said.
A four-month extension to deferred loans, with a drop-dead end date of March 31, will allow banks to spread the volume of loans that need to be restructured or enforced over the six months from the end of September to the end of March.
Some will need to face reality and liquidate the asset or call time on the business rather than wait another four months.
— Mark Hand, ANZ
“Some of that will be driven by customers who look at their circumstances and say it’s time to do something different. I would expect to see a rise in distressed loans and loan defaults at the back end of the year,” Mr Hand said.
Mr Hand said the bank would grant four-month extensions only if the bank believed there was hope.
“There is no point kicking the can down the road if you aren’t going to be better off. Some will need to face reality and liquidate the asset or call time on the business rather than wait another four months.”
Close to 10 per cent of ANZ customers who chose to defer their loans have asked the bank to unwind the holiday or have started making payments of their own accord. ANZ says about two-thirds of customers who have deferred loans should be able to start making some form of payment, according to its admittedly incomplete data.
“There are a large number of customers who could self select and start making some sort of payment. In about four or five weeks we will have a much better sense of the whole picture,” Mr Hand said.
Part of that picture would include a greater proportion of Victorian businesses.
“There is no doubt we will see another spike in Melbourne. Customers who didn’t take it the first time around will be told it was a hassle-free process and will be more inclined to take it this time around.”
Bars, cafes and restaurants most vulnerable
Melbourne’s many restaurants, bars and cafes will be among those putting up their hands for a loan holiday, with few able to get by on the revenue from lower-value takeaway orders.
The Melbourne lockdown has shown Mr Hand that no matter how careful an individual cafe or restaurant is, they remain incredibly vulnerable in the COVID-19 era.
“The idea that pubs, clubs and restaurants will be back in full swing over the near term seems unlikely. They are not going to see the large numbers their business models were built on and I can’t see that returning to normal for some time,” he said.
There are bright spots, however. With holiday makers restricted to domestic travel, Mr Hand expects tourism operators in Queensland to recover a large portion of their income. And many businesses that specialise in the great outdoors are thriving.
“Bike shops, golf shops – the outdoor activities are doing well,” he said.
As a result of COVID-19, the bank is taking a more cautious approach to new business. The big four banks have been hit with a wave of requests to refinance in the wake of the virus crisis as customers eyeball the low two-year and three-year fixed rates on offer.
“The fixed rates have been popular. If 15 per cent were fixed before, around 30 per cent are now. So we have tweaked a few things. We will want to see a payslip from the last 30 days to make sure you are still on the same salary you were earning,” Mr Hand said.
ANZ says it will be more supportive of customers and will try to help as many as possible trade through the crisis. It expects there will be some debt forgiveness and restructuring as it works out what customers can afford to pay.
Banks, the government and landlords wouldn’t be able to carry every affected person to the other side, Mr Hand said, because at some point before March 31, the bill would come due.