Bad home loan debt set to rise in wake of floods

Banks in Queensland have been warned to brace themselves for a sharp rise in the number of borrowers defaulting on payments in the wake of the flood devastation.

In a note to clients, which was obtained by the Herald Sun, Merrill Lynch analyst Matthew Davison pointed to the "tough times" ahead for Bank of Queensland, particularly as its lending book is heavily geared towards the home market.

"With the branch network skewed to Brisbane and many of the [other] affected areas, the customer base will unfortunately be significantly affected by the tragic event," he wrote.

Meanwhile, Goldman Sachs analyst Ben Khoo commented that while loan arrears across Queensland were likely to increase, there could also be an increase in the number of people looking to compare home loans and secure new financing in the long-term once the rebuilding effort comes to the fore.

"If banks choose to extend credit during the rebuild effort … we might actually see loan growth pick up," he said.

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