(RTTNews) - The credit outlook for Australia’s building society sector was negative, the Moody’s Investors Service said Thursday. The economy was slowing while the impact of rising funding costs on margins and increasing delinquencies on asset quality profiles were worrisome factors.

“The negative outlook applies across the sector, as funding pressures increase from strong retail competition, whilst credit quality weakens in line with the current economic environment,” Marina Ip, assistant Vice-President Moddy’s Sydney Office said.

Housing loan balances for the building society sector was expected to contract as loan amortizations exceeded new loan growth. Funding pressures were also intensified by the competition from the Australian Deposit Taking institutions, particularly banks that were aggressively soliciting new deposits. However, confidence in the smaller institutions was bolstered by the government’s deposit guarantee scheme. “After years of enjoying ample lending growth, assisted by rising house prices and falling unemployment, the building society sector is now experiencing a period of much slower growth, which is impacting profitability levels,” Marina Ip pointed out.

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Posted in Categories: Australia, Economy, Releases.

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