Banks at risk of A$7b loss on homes

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Australia's major banks may lose about A$7 billion before taxes from a 30 per cent drop in home prices and a 9 per cent default rate, according to Deutsche Bank figures.

The nation's four biggest banks, whose home loans account for 60 per cent of lending, will face losses ranging from A$61 million ($78.8 million) to A$41.7 billion in a year, Gus Medeiros, head of credit research and strategy at Deutsche Bank, said in a report.

The smallest drop will be the result of a 1 per cent default rate and a 10 per cent home price decline, while the worst case scenario factors in a 15 per cent default rate and a 60 per cent plunge in housing values.

Home prices in Australia's eight capital cities fell 0.3 per cent in April, and decreased about 1.5 per cent over the year ended April 30, according to real estate researcher RP Data.

The declines, combined with rising mortgage defaults and increases in the number of properties listed for sale, have lent support to claims the nation is on the brink of an overdue rout.

The financial services companies included Commonwealth Bank of Australia, ANZ Banking Group, National Australia Bank and Westpac.

Most didn't immediately respond to messages seeking comment but Westpac Bank spokeswoman Jane Counsel referred to the group's half-year results released May 4, which detailed a reduction in "low-doc" lending and delinquencies that remained below industry levels.

- Bloomberg