At time of writing, the share price of Australia and New Zealand Banking Group Ltd [ASX:ANZ] is down 3.5%, trading at $26.20.
This downward pressure is beginning to reverse recent gains the bank made over the last week in an otherwise tough year for the company:
Today’s movement comes after an announcement that the company would be vetting its customers more closely.
ANZ ‘deep dive’ on mortgage loan applications driving share price down
With lax mortgage loan standards landing in the spotlight of the Banking Royal Commission’s Interim report, ANZ is modifying how it assesses its customers’ ability to repay their loan.
It’s preparing to roll out a system whereby potential customers are screened based on a ‘deep dive’ of their financial history.
Measures include having third party agencies check on an applicant’s credit card, personal and car loan debt. Additional documentation in the form of six months of salary credits is also required for part-time workers.
Workers will be trained on how to properly interview potential customers to find signs of financial hardship.
Changing lending rules may be seen as a sign of weakness amongst investors
The dip in ANZ’s share price could be seen as a sign that the company is weaker after nearly a year of scrutiny by the royal commission.
Tighter lending procedures will likely lead to short-term revenue loss for the company, according to its CEO Shayne Elliot.
The bank may also be particularly worried about the potential for contagion to spread in the housing market, with a large cohort of interest only loans to roll into principal plus interest repayments.
If customers cannot make these repayments and default, it could have grave flow on effects to the Big Four banks.
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