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Banks mull rolling out wider debt relief measures

“The ABA and Member Banks anticipate that there will be a continued and increasing need to take urgent industry-wide action to minimise the broad, varied and rapidly evolving impact of COVID-19 and the Government legislated shutdowns to protect public health, on their retail and business customers,” the ABA said in its submission to the ACCC.

Bank support packages for customers are part of the government’s plan to shield the economy from the coronavirus crisis, and analysts say the relief efforts could also help to protect lenders from a deeper cycle of loan losses.

Even so, the market is still bracing for sharply higher bad debt charges, which analysts say will hit dividends.

Morgan Stanley analysts led by Richard Wiles on Tuesday forecast Australian bank profits would fall by about 30 per cent from the 2019 financial year to 2021, with all of the big four to also cut their dividends, despite banks’ relief packages helping to soften the blow.

“In our view, the severity and duration of this loan loss cycle should be limited by the combination of fiscal and monetary policy initiatives and measures from the banks to support households and businesses,” the analysts said.

The banks’ retail operations have also been disrupted by coronavirus, with lenders forced to temporarily shut some branches due to staff shortages. There has even been the suggestion that banks could potentially share branch infrastructure in some locations, as a last resort, to keep the doors open to customers.

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Banks were last week swamped by cries for help from businesses thrown into turmoil by forced closures and sudden plunges in revenue.

The number of people visiting branches, meanwhile, has dropped as consumers are advised to stay at home, especially elderly consumers. Small business customers have also been visiting branches less to deposit their takings, after many retailers, restaurants, cafes and pubs were put into “hibernation.”

At the same time there has been a surge in the use of digital banking, with CBA on Wednesday set to contact 250,000 elderly and vulnerable customers to inform them of digital banking options.

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