Bad debts predicted to double in number
A possible doubling of defaults by households and businesses on their bank loans is being tipped as a coronavirus-created recession begins to bite.
Despite the predicted surge in bad debts, Australian banks and their New Zealand subsidiaries have enough capital to weather the storm, said international credit rating agency Standard & Poor’s.
There was uncertainty over exactly how bad credit losses would be in New Zealand following the announcement of the Government’s $12.1 billion economic stimulus package, said S&P banking analyst Sharad Jain.
‘‘The credit losses could double,’’ said Jain. ‘‘They have been running at very low levels for the last several years, much below what we would expect to be the long-term average.’’
Australia and New Zealand borrowers would cope better than borrowers in many other developed countries, Jain predicted.
Exactly how bad loan default levels got in New Zealand was difficult to predict with certainty as coronavirus policy interventions by governments in New Zealand and around the world were happening so fast.
New Zealand banks were urging customers who run into trouble making debt repayments to talk to them as early as possible.
Roger Beaumont, chief executive of the New Zealand Bankers’ Association, which speaks for member banks including ANZ, ASB, BNZ, Kiwibank and Westpac, said: ‘‘The sooner you talk to your bank, the better placed they are to help you.’’
When customers run into financial difficulties banks had a number of ways they could help.
These included reducing, or suspending repayments, consolidating loans to make payments more affordable, and providing short-term funding.