Not all mortgage exposures are created equal

There's been a lot of discussions lately about the current state of the residential property market and the potential for a correction, or even a collapse, in residential property prices. Regarding the most exposed banks to any correction in Australian residential property prices, most of the discussion revolves around the proportion mortgages make up of each bank’s loan book. As such, the most common assessment is that of the majors, CBA and WBC have the most exposure. The chart indicates that the regional banks have the most significant exposure to Australian mortgages, followed by WBC and CBA. However, not all mortgage books are equal. Given that a non-performing loan is essentially a straight write off to the equity value of a bank, another way to look at a bank stock’s exposure to a downturn in Australian residential property prices is the mortgage book as a percentage of the bank’s market capitalisation. Read the story within and see more charts: (VIEW LINK) (Stuart Jackson, Senior Analyst)

Stuart Jackson
Senior Analyst and Portfolio Manager

Prior to his departure in August 2022, Stuart was employed by Montgomery Investment Management for over seven years as a Senior Analyst and Portfolio Manager of The Montgomery [Private] Fund.

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