WELLINGTON - New Zealand banks are erring towards undue caution in their business lending, an analysis of their credit losses suggests.
Research by Massey University's director of banking studies, David Tripe, found that bad debt provisioning during 1998 had remained relatively stable during what was supposed to havebeen a recession, to finish the year at levels considerably lower than averages for US and Australian banks. "Either the banks have got very good at their business lending, or they are doing less of it, Mr Tripe said.
Mr Tripe said the banks' bad debt statistics were likely to relate mostly to business lending since home and farm lending had relatively low default rates.
According to Mr Tripe, banks' credit losses ranged between a negative 0.12 per cent of total assets (in other words they made a gain) and 0.19 per cent between the September quarter of 1996 and December 1998.
In comparison, in the decade to 1986, Australian banks' impaired assets had ranged between 0.1 and 1.2 per cent, while in the US they had been between 0.28 and 1.3 per cent in the 11 years to 1997. "If New Zealand had been experiencing a recession during 1998, and if the banks had been undertaking significant lending to the business sector, one would have expected them to show bad and doubtful debt expense of at least 0.5 per cent of average total assets, Mr Tripe said.
However, nothing like that was observed, even although two of the banks, ANZ and BNZ, moved on to a more conservative "dynamic provisioning basis under which expected losses are recognised at the time loans are made.
The observation comes as a host of businesses complain about the difficulties they face in getting funding.
A recent report by the Manufacturers Federation found that manufacturing as a whole was getting 4.6 per cent of bank lending while agriculture was receiving 9.1 per cent.
