Banks to Deliver Profit Reports as APRA Warns of Hardship Risks

In a letter sent to several bank executives, the Australian Prudential Regulation Authority (APRA) has advised the industry on lending risks, saying that they should not be giving their customers any leeway or concession brought about by hardships.

Many of these banks are reportedly still in the process of doing proper accounting on how much impact the recent natural disasters have caused its depositors. And as a result, the banks are expected to reduce interest rate payments or give loan maturity allowances.

But the APRA said, some banks are considering other types of methods to stop the debt collection process and get a clean slate altogether.

According to APRA, the practice may be reasonable if one looks at an operational perspective. It, however, can obscure prudent regulatory and internal reporting of impaired and past-due loans.

Mortgage lending is at its slowest pace since the 80s while banks search for more funding by encouraging and enticing depositors.

The banking industry is scheduled to deliver its full-year profit this week, and so far Commonwealth as already complied with its month end reporting date for June. ANZ, Westpac and National Australia Bank (NAB) are expected to follow.

Commonwealth has reported a $7 billion full-year profit, compared to last year’s $6.7 billion while June quarter earnings for ANZ and NAB may fall at $1.4 billion. Westpac is expected to be at $1.55 billion for the same time frame.

The reports are going to be under scrutiny by investors, who would want to see how these banks are balancing cost versus funding.

These profit level reports, according to a Treasury official, benefits businesses as investors and consumers will be able to see that they have the capacity to operate and lend money.