Bankwest gripes aired anew

The practices of Commonwealth Bank and its subsidiary Bankwest, since the takeover of the latter in late 2008, received an airing on ABC's Four Corners last night, with the issues touched on being a reminder of the scrutiny the bank faces as a Senate committee begins hearings in three to four months time.

The ABC broadcast centred on reviews of valuations of security property mortgaged in support of four commercial loans.

One case concerned that of Perth property developer Luke Saracini, whose grievance against CBA over the Raine Square development has been well publicised.

The other three cases were those of a nursing home developer in northern New South Wales, first-time motel owners on the mid-north coast of NSW and a first-time publican in western NSW.

It is the case of the nursing home developer, Peter Walsh, that highlights one of the central allegations of the Unhappy Banking lobby of disgruntled Bankwest customers. This is the supposed practice of valuers engaged by the bank being instructed to adopt artificially low values in the course of facility reviews. These low valuations lead, in turn, to breaches of contract (such as excessive loan-to-valuation ratios) and allow the bank to appoint receivers and sell the security property.

Four Corners did not otherwise explore this issue, though it did report some of the colour from the bank's mid-2010 review of Bankwest's commercial loans.

As reported by Commonwealth Bank, in its full-year results in 2010, the impairment expense to gross loans in the Bankwest business banking division jumped from 68 basis points in June 2009 to 248 basis points in December and 590 basis points in the June 2010 half. Of the 590 basis points in impairments for that period, 251 points were added as a result of the review.

Adrian Bradley, the group media manager for Bankwest in 2010 (who now assists the Unhappy Banking lobby) told Four Corners that the review took place in a "panic".

Bradley said of the customers featured in the Four Corners report: "To be charitable, they got swept up in something they should never have been swept up in."