They also maintained strong liquidity positions ahead of the final repayments of the Term Funding Facility
Authorised deposit-taking institutions (ADIs) are well-capitalised and positioned to handle potential economic challenges, the Australian Prudential Regulation Authority (APRA) has said, following the release of its Quarterly ADI Performance and the Quarterly ADI Property Exposures publications for the quarter ending March 2024.
APRA reported that capital ratios reached a new high, despite narrowing margins and slowing profit growth. Profit levels remained consistent with the past decade, while liquidity and funding levels were well above minimum requirements.
The prudential regulator said ADIs maintained strong liquidity positions ahead of the final repayments of the Term Funding Facility in June. Although non-performing loans increased, potential credit losses are mitigated by a high level of well-secured loans.
Residential mortgage credit growth moderated but remains above pre-pandemic levels, despite higher interest rates and pressure on ADIs’ lending margins. Strong demand in the industrial sector supported growth in commercial real estate lending, although the overall rate of growth continued to slow. Non-performing commercial real estate exposures increased but remained low.
For the March 2024 quarter, key statistics for ADIs include a net profit after tax of $39.4 billion, down 4.3% from March 2023’s $41.2 billion. Total assets increased by 1.9% to $6,205.3 billion.
The total capital base rose by 4.8% to $449 billion, while total risk-weighted assets grew slightly by 0.2% to $2,192.9 billion. The total capital ratio improved by 0.9 percentage points to 20.5%. The liquidity coverage ratio decreased by 1.2 percentage points to 136.5%, and the minimum liquidity holdings ratio remained stable at 17.8%. The net stable funding ratio fell by 3.5 percentage points to 118.2%.
For ADIs conducting residential mortgage lending, residential mortgage credit outstanding rose by 4.1% to $2.23 trillion. Owner-occupied loans increased by 4.9% to $1.49 trillion, and investment loans grew by 3.8% to $667 billion. The share of owner-occupied loans as part of total residential mortgages increased by 0.3 percentage points to 67.8%, while investment loans decreased by 0.2 percentage points to 30.3%.
Loans with a loan-to-value ratio (LVR) of 80% or higher decreased by 1.2 percentage points to 17.8%. Loans 30-89 days past due increased by 0.2 percentage points to 0.7%, and non-performing loans rose by 0.3 percentage points to 1.0%.
New residential mortgage loans funded during the quarter decreased by 1.2% to $131.1 billion. The share of new owner-occupied loans fell by 3.2 percentage points to 64.6%, while investment loans increased by 2.9 percentage points to 33.2%.
Loans with an LVR of 80% or higher rose by 2.1 percentage points to 31.1%. Loans with a debt-to-income ratio of six times or greater fell by 2.3 percentage points to 5.2%.
For commercial property, total commercial property limits increased by 2.9% to $449.9 billion, while actual exposures to commercial property rose by 3.8% to $419 billion.
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