Westpac Singapore pulls rug from under 300 mortgage customers

Singapore

WESTPAC Singapore is exiting the mortgage business, leaving 300 borrowers - both foreigners and Singaporeans - in the lurch.

The Singapore office, which also houses the Asia headquarters of Australia's oldest and second largest bank Westpac Banking Corp, is unwinding its loan portfolio related to properties in Australia and New Zealand.

The Business Times understands that in late March, Westpac Singapore notified its customers with outstanding loans about the bank's decision and were given six months - by end-September - to repay or refinance the loans.

Westpac's mortgage customers in Hong Kong are facing the same fate.

The bank drew the ire of already-nettled customers when it followed up in early May with a formal demand for payment from some customers, reminding them of the terms of the facility and that if the amount was not paid, the bank would take the client to court or take possession of the related property.

According to the demand notice seen by BT, the bank also said that if the outstanding loan was not cleared, it intended to notify a credit reporting agency of the default by the customer.

"Westpac Singapore has really let its customers down here... People with mortgages need and deserve certainty from their lenders," said an Australian citizen and long-term resident of Singapore who took out a loan for a property in Sydney.

"They should have organised this better - to transfer the loans to another provider or moved them to the parent bank in Australia or New Zealand. If they make these decisions, they should be prepared for the consequences," he added.

Some years back, the Royal Bank of Scotland's Singapore branch also quit the mortgage business here but made arrangements to transfer existing mortgage loans to its Isle of Man branch.

In response to BT's queries, Westpac said its decision to close its investment property loan book in Singapore as well as in Hong Kong was made "after careful consideration of commercial and strategic factors, including our ability to service this market competitively". The bank has also stopped offering new loans since 2016.

It stressed that its relationship management team was working with all individual customers on refinancing options and there have been regular communications.

"Westpac is committed to working with all of our impacted customers throughout this process and has arranged alternative refinance options for customers through local banks in Singapore and Hong Kong, and Westpac in Australia and New Zealand. "Westpac is also covering reasonable costs for customers associated with refinancing," it elaborated.

BT understands that the options include a "non-exclusive, non-binding arrangement" with OCBC, Singapore, to assist with local refinance options subject to the latter's loan application process, credit criteria and relevant terms and conditions.

Westpac has also offered to help with "refinance inquiry" with its office in Australia and New Zealand for customers who are Australian and New Zealand citizens and/or permanent residents who are non-taxation residents in these two countries.

When contacted, a Monetary Authority of Singapore (MAS) spokesperson replied: "MAS does not interfere in commercial decisions made by financial institutions so long as it continues to fulfil its regulatory obligations. Such decisions include whether or not the financial institution should continue a specific line of business.

"However, we expect all financial institutions to treat their customers fairly. This includes providing customers with clear and relevant information in a timely manner, to enable them to make informed financial decisions."

The latest development marks the third Australian bank that is winding down its retail business in the city state. Two years ago, the National Australia Bank - one of Australia's "Big Four" - offloaded its private wealth business including mortgage loan books worth some US$1.7 billion to OCBC Bank.

In the case of NAB, particularly for mortgage holders and given the nature of the deal, the process was smooth with continuity and no stress.

"They (NAB customers) didn't have to do anything. But in this case (with Westpac), some are stressing on how to refinance their loans, more so as Australian banks may be applying tighter criteria on loans especially for foreign sourced income," said a source.

Westpac's move is unfolding amid a gruelling, year-long landmark inquiry by the royal commission into Australia's banking sector that unearthed years of wrongdoing and poor behaviour and worries that more onerous regulations await the sector already hit by a tough housing market and ballooning compliance costs.

Westpac recently reported half-year profit that fell by almost a quarter, hurt by higher customer compensation and related costs even as home lending stagnated. The other Australian big banks are facing similar challenges including an economy that has slowed over the past 12 months.

One observer said the move by Westpac is a continuation of the consolidation wave in Asia's private banking space at a time when wealth is rising alongside changing consumers' preferences as well as operational and regulatory challenges.

In 2017, Singapore's DBS Bank, the largest bank in Southeast Asia, wrapped up its buyout of Australia's third largest bank ANZ's (Australia New Zealand Banking Group) wealth management and retail banking business in five markets including Singapore and Hong Kong.

In the statement, Westpac added: "Westpac remains committed to the region and all of our other core business offerings are business as usual. Westpac's core strategy is helping to connect corporate and institutional customers to the trade and investment flows between Australia, New Zealand and Asia."

READ MORE: Australian regulator to ease mortgage rules in reprieve for banks