Australian banks have limited exposure to Bathla collapse

The collapse of Western Sydney developer Bathla Group into voluntary administration on August 25, owing $3 billion, has raised questions about how exposed Australia’s major banks are to the fallout. While direct risks appear limited, analysts warn of broader stress in construction and property development—sectors where credit quality can deteriorate quickly.

Morgan Stanley analysts noted in a research paper that the major banks’ direct lending to Bathla is minimal. However, they highlighted second-order risks: tighter funding conditions, weaker property valuations, and strain on small and medium-sized enterprises (SMEs) that rely on developers and contractors.

The banks themselves have already faced pressure this year. Cracks began to show in August, when the suite underperformed the ASX 200 by 7.5 per cent. The sector is still grappling with persistent inflation, multiple interest rate hikes, and slowing mortgage growth.

A closer look at the banks’ exposure reveals a mixed picture. Construction loans make up about $58 billion of their combined portfolios, roughly 2.5% of total loans at NAB and Westpac, 2% at Commonwealth Bank, and 1.5% at ANZ. Bank disclosures suggest around 20% of these loans are unsecured, while a further 35% or so are partially secured.

Commercial property is a bigger concern. The major banks hold $393 billion in these loans, about 7% of total exposure, 13.5% of non-mortgage loans, and 25% of non-housing loans. CBA leads with $119 billion in exposure, while ANZ has the least at $77 billion.

Disclosure gaps make risk assessment difficult. Only NAB provides detailed sector-specific adjustments, showing combined forward-looking adjustments for commercial property and construction rising to $110 million in the first half of 2026, up from $66 million in late 2025.

Analysts point to 2009 as a cautionary example. This indirect exposure complicates risk assessment.

Private credit firms have filled the funding gap left by banks after the 2008 financial crisis, stepping in where major lenders pulled back. An ASIC review from late 2025 found banks increasingly lending to these private funds through subscription and net asset value facilities, sometimes originating loans that are later passed on.