8 Sep 2015

Housing concerns weighing on banks - PwC

3:14 pm on 8 September 2015

Accounting firm PwC says concern about Auckland's overheated housing market and the state of the rural industry is weighing on the banking sector, despite an improvement in bad debt.

Auckland houses

Photo: RNZ / Diego Opatowski

In its latest review of the five major banks, profit before tax edged down slightly to $1.7 billion in the three months to June, compared with the previous quarter.

The amount of money set aside to cover bad and doubtful debt declined 3 percent to $1.9b.

But PwC pointed out Standard and Poor's had dropped its credit ratings for the Australian-owned major banks - ANZ, ASB, BNZ and Westpac - reflecting concerns over the potential for sharp falls in property prices.

The banks continue to be well above regulatory minimums for capital levels, with an average total capital ratio hovering at 12.5 percent.

The latest QV House Price Index, released last week, showed Auckland house prices rose 5.6 percent in the last three months, and more than 20 percent in the last year.

However, Barfoot and Thompson's latest housing survey, also released last week, said the average price in August dropped by nearly 1 percent from July to $821,079, which was also lower than prices in June and May.

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