Housing sector slowdown to curb profits
(Australia) Australia’s six largest banks can expect to deliver solid financial results for the rest of 2003 but will feel the slowing housing market in their loan profits, according to Fitch Ratings.
In its half-yearly review of Australian banks, Fitch said in comparison to the US and Europe, banks’ profitability had "remained high, despite a difficult global environment", due in large part to the buoyant housing sector.
"Over the past three years, housing activity (construction and renovation) has been a significant contributor to Australia’s relatively high rate of GDP growth and the associated demand has strongly contributed to banks’ loan growth," Fitch said.
Although housing market activity was expected to slow, resulting in lower profit growth, Fitch said banks’ "overall asset quality" would not be adversely affected.
"Credit quality is very high and while Australia’s housing market may prove to be overheated, any subsequent cooling is unlikely to result in large loan losses," the ratings agency said.
"Present capital ratios are satisfactory; [our] ratings reflect expectations that the banks will maintain capital levels within their current target ranges."
"Over the past three years, housing activity (construction and renovation) has been a significant contributor to Australia’s relatively high rate of GDP growth and the associated demand has strongly contributed to banks’ loan growth," Fitch said.
Although housing market activity was expected to slow, resulting in lower profit growth, Fitch said banks’ "overall asset quality" would not be adversely affected.
"Credit quality is very high and while Australia’s housing market may prove to be overheated, any subsequent cooling is unlikely to result in large loan losses," the ratings agency said.
"Present capital ratios are satisfactory; [our] ratings reflect expectations that the banks will maintain capital levels within their current target ranges."
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