SYDNEY, Australia – There are now nearly 400,000 Australians registered to join the COVID-19 loan holiday that big banks are offering.
Only three weeks after the four biggest banks in the country started dispersing their national coronavirus initiatives, and there are already around 375,000 individuals riding in on the offers. They are offering Australian households and small businesses an option for relief and deferrals for their loan repayments.
Each of the four of the largest banks in Australia, National Australia Bank, Westpac, ANZ, and Commonwealth Bank, received tens of thousands of requests and loan deferral applications. There has been an increasing number of Australians seeking leniency for their loan repayments because of the financial hardship due to the spreading coronavirus disease.
The home loan deferrals for mortgage customers are good for six months and are available for individuals and businesses directly affected by the COVID-19 pandemic. CBA is currently processing and handling about 50,000 applications for this, and around 25% of the total applications are from property-owners and landlords who hold investor loans.
Around 76,000 of both small and medium-sized enterprise customers also got automatic deferral in their business loans from various banks in the country. However, they also have an option to opt-out of this loan holiday. But if they choose to do so, SMEs still have a three-month loan repayment deferral, although they may need to apply for the offer.
The automatic loan deferral process applies to select SME customers who have a maximum of $5 million worth of debt. This procedure is different from the relief approach taken by the three other major banks in the country.
According to banks, the policy was put in place to help minimize or eliminate red tape when it comes to businesses in need of financial relief, especially during this crisis. However, bank sources revealed that there is around 1% of business borrowers who opted out of the automatic loan deferral procedure.
The group executive of the business and private bank of CBA, Mike Vacy-Lyle, stated that the bank is currently extending its loan holiday offering to SMEs. It will now cover those who have loan debts up to $10 million. This package will also be on an opt-in basis.
Mr Vacy-Lyle said in an interview that they had made announcements over the last fortnight about the couple of measures they are going to offer customers. It will be to support small businesses during this struggling period due to the health crisis, he said.
Mr Vacy-Lyle further commented that they decided to extend their holiday package as medium and large-sized businesses are also looking for significant financial support during this time. He said that with the CBA supporting not only SMEs but more prominent companies as well, they could help more businesses to remain afloat during this challenging time.
Meanwhile, ANZ also reported receiving inquiries from 50,000 home loan customers wanting to apply for the mortgage repayment deferral. There are also about 20,000 applications that the bank received from their business customers.
For NAB, there are around 53,000 of loan customers enrolling for business or home loan support through the bank’s online forms. Earlier in the week, NAB launched its business loans for companies with up to $250,000 worth of aid in response to the SME loan guarantee scheme from the federal government. Since then, the bank received over 2,000 requests for this package.
The updated number of inquiries and applications correlates with what Peter King, the newly appointed chief executive of Westpac, said on Thursday.
He said that Westpac received over 100,000 questions from its customers along with 26,000 inquiries from small businesses looking for financial backing.
Matthew Wilson, an analyst at Evans and Partners, said in a note sent to clients that the 100,000 number of requests that Westpac received accounted for 8% of the total home loan customer base of the bank.
On his first day as the head of Westpac, Mr King stated that the bank’s decision on its dividends would be part of the report of its half-year results, which is in May.
Meanwhile, the decision of the Reserve Bank of New Zealand to order the big four banks in Australia to suspend their dividend payments remain a shock to most. These major banks dominate the financial services space of the country and the order from the Reserve Bank sparked anxiety over domestic dividends coming under pressure.
Mr King said in an interview on Friday that they will decide Westpac and its dividends on May, citing that it is one of the critical choices they have to make. He further stated that if the government and regulators concluded that such a measure is the best for Australia’s economy, then they will have to follow.
Meanwhile, Prime Minister Scott Morrison stated on Thursday that the Australian government is contemplating ordering banks to halt their dividends.
Mr King also remarked that any ruling about dividend payment suspension would need to balance out between the strength of the balance sheet and the interests of retirees living off the shares.
Mr Wilson also commented regarding the history of the four big banks in the country to concentrate on loan customers over their investors when it comes to interest rate cuts. He stated that Westpac is most likely going to support the latter when the time comes.
He said that the Australian economy would come on top and the essential factor for the bank is the preservation of capitals to aid and absorb bad debts.
Meanwhile, ANZ and NAB declined to comment about the dividends, but the banks can announce any news during their half-year result briefings in late April and May, respectively.
CBA also opted out of commenting further on the issue.
On the other hand, NAB will expand its COVID-19 financial support to personal loan and credit card customers. Starting today, the bank will relinquish its late payment fee on all credit cards, which is worth $15. This offer will be available for the next three months.
Personal loan customers of the bank can also access the slashed minimum repayments for six months starting April 17. However, this option is not automatic. Those who want to enrol has to send an opt-in request to the bank.