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ANZ boss Shayne Elliott warns bad loans will be a reality amid coronavirus fallout

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ANZ CEO Shayne Elliott in a one-on-one interview with the ABC's Elysse Morgan

“This is not a get out of jail free card,” ANZ CEO Shayne Elliott says of loan deferrals.(ABC News: John Gunn)

The boss of one of Australia’s biggest banks concedes that not all borrowers will survive the economic fallout from the pandemic, while backing the extension of loan repayment deferrals as a lifeline.

Key points:

  • The banks will extend loan repayment deferrals until March 31 for some borrowers
  • “We can’t save everybody but we can save a lot of people,” ANZ boss Shayne Elliott says
  • The Australian Banking Association says around 800,000 borrowers have deferred repayments
  • ANZ chief executive Shayne Elliott told the ABC’s AM program there will be loan impairments as some borrowers have little prospects for getting back on their feet.

“We can’t save everybody but we can save a lot of people — the people who have positive prospects of getting back into employment and getting their business started again,” Mr Elliott said.

“If we believe that you really don’t have a prospect of paying back your loan, we have an obligation to impair that loan and work with you on a solution.

“This is not a get out of jail free card, but if it’s the right thing to call it a day and say this business isn’t viable or your home isn’t viable then it’s sadly our responsibility to have that conversation.”

However, Mr Elliott welcomed the four-month extension of the initial six-month loan repayment deferrals, which we’re on track to hit a potentially catastrophic ‘cliff’ in late September when the emergency measure was scheduled to end.

The Australian Prudential Regulation Authority (APRA) has set a new deadline, signing off on extending the deferrals until March 31 next year to ensure distressed loans are not treated as arrears or impairments.

Mr Elliott rejected concerns that a failure by banks to extend the deferrals could spark a housing catastrophe, but refused to rule out potential foreclosures on bad loans next year.

“The four month extension is critically important. We believe that a lot of them will get back on and start paying,” Mr Elliott said.

“It’s not like people have given up, frankly. Most are hanging on and they need a bit of time.”

Since the original support package was announced in March, ANZ has provided repayment deferrals on more than 100,000 home, personal, small business and commercial accounts.

The Australian Banking Association says around 800,000 borrowers across all its members have their loan repayments on deferral.

A National Australia Bank executive has told The Business that around 80 per cent of customers the bank has spoken so far want to keep their loan repayments on hold.

NAB’s group executive for personal banking Rachel Slade said the bank is at the early stages of starting to check in with borrowers who have deferred repayments, but has already spoken to thousands of people.

“From this week we’ll speak to about 10,000 a week,” Ms Slade said.

“From those that we’ve checked in with, about one-in-five have opted to start making repayments again, but obviously we know there are many of our customers who are doing it tough.”

Extended interview with Rachel Slade(Elysse Morgan)
ANZ boss expects JobKeeper extension
Mr Elliott expects the six-week lockdown restrictions and border closure between Victoria and NSW will most likely mean more applications for repayment deferrals.

“This is a bit of a setback. I don’t want to overplay it. Yes, it’s going to be tough, we’ll probably see another short-term spike,” Mr Elliott said.

“I don’t think it’s going to be overwhelming though.”

He also expects that more emergency stimulus will be provided to extend the $70 billion JobKeeper program, which is currently scheduled to wind up in late September, to avoid another ‘cliff’.

“I think the idea that the Government just pulls the rug on September 30 — they’re not foolish. They’ve handled this well to date and I expect they’ll continue to do so.”

Mr Elliott rejected speculation that the Federal Government might step in with a mortgage subsidy to further assist distressed borrowers, saying he would be reluctant to favour one significant class of people over another.

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