Commonwealth

Now that the big four bank reporting season is over, there’s one thing that really stands out -- the massive contrast between the COVID-19 crisis and the GFC when it comes to bad debt provisioning.

The big four were slow to recognise how bad the GFC was going to be, with only modest write-offs in 2007-08 of $5.62 billion, up from the boom-time low of just $2.24 billion in 2006-07. This was followed by a huge jump in 2008-09 to a record $13.1 billion in write-downs, followed up by a still historically large collectively write-down of $8.2 billion in 2009-10.

This time around, all of our major banks went way over the top with excessive COVID-related provisions only to very quickly reverse some of that pessimism, as shown by results released by NAB, ANZ, Westpac and CBA over the past week.