According to APRA’s latest release, authorised dept-taking institutions (ADI) experienced a 23.5 per cent lift in net profit after tax to $32.3 billion at the end of June 2021, confirming the industry’s resilience amid the COVID-19 pandemic.
Total assets edged up 1.0 per cent to $5,382.7 billion, while the ADI’s total capital base added 11.5 per cent to $387.1 billion.
However, despite holding strong capital and liquidity positions, along with improved profitability, the Australian Prudential Regulation Authority (APRA) noted that the outlook for ADI’s appears uncertain given the challenges currently faced by the industry from the Delta variant of COVID-19 and ongoing lockdowns.
In residential mortgage lending, in particular, APRA noted that the share of new lending with high debt-to-income ratios increased over the quarter, continuing to be influenced by the low-interest rate environment and increasing house prices.
In fact, residential mortgages increased 4.7 per cent to $1,935.2 billion, with owner-occupiers making up the bulk of the total sum or $1,234.1 billion – up 8.7 per cent on the year.
The regulator did, however, note that other measures of higher-risk residential mortgage lending fell, including the share of new lending with high loan-to-valuation ratios.
Earlier this year, prior to a new round of stringent lockdowns across NSW and Victoria, economists at ANZ said they expect APRA and the Reserve Bank of Australia (RBA) to move to cool the housing market ahead of 2022.
“With credit growth set to accelerate over the coming months, ANZ Research expects APRA will announce hard macro-prudential controls by the end of the year,” ANZ predicted.
Most of the major banks have made similar predictions and with the price of housing continuing to climb despite lockdowns, many believe APRA could pull the handbrake within months.
Maja Garaca Djurdjevic
Maja's career in journalism spans well over a decade across finance, business and politics. Now an experienced editor and reporter across all elements of the financial services sector, prior to joining Momentum Media, Maja reported for several established news outlets in Southeast Europe, scrutinising key processes in post-conflict societies.
