UBS: SME calamity to smash banks

Via the excellent Jonathon Mott at UBS:

Direct exposure to small businesses – 18% of SME book in deferral

Limited disclosure is available breaking down the 220,000 business loans (total ~$60bn) that are currently on loan repayment deferral until Sept/Oct (or Mar-21). ANZ and WBC provided a broad industry breakdown of their deferred business loans, showing their largest exposures are to: property; business services; retail; hospitality; and construction. However, these loans are far from homogeneous, making broad-brush analysis of potential losses very challenging. While the banks took economic overlays at the 1H20 results, ANZ disclosed a Collective Provision top-up of just 3.3% of its deferred business loans, equivalent to just 46bps of its SME & business banking books (ex-Insto). While these books have security, foreclosure en masse is not a straight forward process.

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About the author

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.