CBA keeping close eye on housing investor loans as profits surge to $2.4b

Commonwealth Bank chief executive Matt Comyn says he would be wary about any resurgence in speculative borrowing by property investors, even though lending standards have so far remained strong as house prices have taken off.

As a stronger economy drove CBA’s first quarter profits sharply higher to $2.4 billion, Mr Comyn also said the bank had more than $10 billion in surplus capital, and its board could consider its capital management options. Analysts expect it will launch a major share buyback.

Banks are benefiting from the housing boom as loan growth accelerates, and Mr Comyn on Wednesday sought to hose down concerns about the market overheating, by emphasising the differences between now and the investor-led boom of the last decade.

Mr Comyn said the bank had experienced strong demand from first home buyers and owner-occupiers, and he re-affirmed the lender’s expectation for price growth of about 10 per cent this year and 6 to 8 per cent next year. Mr Comyn said the state of the market was not concerning to CBA, but this could change if investor credit took off.

“Where it would become more concerning was if it was becoming concentrated in certain markets, more investor-driven, more speculation-driven, versus very clear incentives that are in place for good reasons to attract first home buyers to the market,” Mr Comyn said.

“We think credit quality, credit standards across the industry, are not deteriorating, and we don’t expect them to.

“If credit growth starts to rapidly accelerate combined with investor lending increasing, that would certainly give cause for concern, but we revisit all of our settings and go through all of the detail about what we’re seeing every month.”

Figures earlier this month showed a 12.7 per cent lift in new property investor loans in March, as new lending to first home buyers fell for the second month in a row. Mr Comyn said investor applications for loans from CBA had picked up, and the bank was “watching closely on a very targeted basis,” as this was a risk factor.

Mr Comyn praised the fiscal stimulus unveiled in Tuesday night’s budget, including an extension of $20.7 billion in business tax breaks, which he said would support a further lift in business investment.