Household bank deposits drop $7.7b, in first decline in two years

Westpac boss Peter King warned in July, however, that savings buffers were running down, and all three executives have said financial pressure on households will probably get harder as the impact of 12 interest rate hikes in 14 months flows through.

Westpac senior economist Matthew Hassan said about $20 billion of the $260 billion in excess savings reserves during the pandemic had been drawn over the six months to March and “no doubt more since then”.

UBS head of Australian bank research John Storey cautioned APRA’s data on household deposits only covered one month, but said it came amid anecdotes that more customers were starting to withdraw funds from offset accounts. “It does feel like some of the interest rate increases that we’ve seen are having some kind of impact around monthly cashflows,” he said. “It feels like consumers are under some degree of duress and the lagged impact of these rate rises is starting to come through, but it’s one data point and we don’t want to read too much into it.”

Meanwhile, the value of home loans on banks’ books increased 0.6 per cent in June according to the APRA data, led by Westpac which grew its housing credit by 0.75 per cent. ANZ and CBA’s housing credit growth slowed slightly over the month at 0.65 per cent and 0.35 per cent respectively, while NAB saw stronger growth at 0.51 per cent.

Macquarie, which last month looked to be taking its foot off the pedal in the home loan market, registered the biggest housing credit growth of the five major home loan players in June at 0.97 per cent.

The figures come as investors gear up for earnings season where they will be watching for the impact of a slowing economy, higher funding costs and narrowing net interest margins on banks’ earnings and dividends.

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Martin Currie chief investment officer Reece Birtles said lower savings would probably reduce customer demand for credit and, as funding costs normalised, the large mortgage discounts offered by banks would come home to roost.

“Lower net interest margins will lead to reduced revenues, which, we believe, will be even lower than the consensus estimates for the next three to five years,” he said. “This, in turn, will result in a higher-than-expected cash earnings shortfall compared with our earlier expectations and consensus.“

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