The same trends are evident in Australian business, which is also benefiting from a strong stock market, rising asset prices and massive amounts of global capital looking for housing. Yet this M&Booming activity among Australian businesses is less surprising than the resurgence of small and medium-sized businesses in the country despite the trauma of repeated lockdowns in most states.
They came back strong enough
Many did not survive, of course, those who depend on traffic and the CBD customers of Melbourne and Sydney particularly affected. Central Melbourne is still more of a ghost town than a bustling hub of offices, restaurants and bars, with people having to wear masks to enter non-essential retail stores.
Andrew Irvine, Melbourne-based NAB’s business and private banking director, said he has found the resilience of Australian businesses “unbelievable” since arriving from Canada to take on the role 15 months ago.
“Outside of a small lineup of customers in some industries, and generally in CBD, most business owners are either thriving or able to hibernate effectively during lockdowns and have been able to come back quite strongly.” , he said.
“You can just smell it in the air right now. Customers are optimistic, confidence is returning.
Even a modest rate move in the SME market – especially if it did not coincide with a simultaneous increase in the RBA’s cash rate – would certainly test the patience of Australian business owners with all of them even more. the big banks.
This was reflected in the release of NAB’s results this month, showing its lending activity grew by almost 7% in the year through September.
Additionally, Irvine believes most small businesses would also be able to cope with slightly higher rates than reliance on record rates suggests.
“While business owners wouldn’t like interest rate hikes, they would be in a good position to absorb them in the 100 to 200 basis point range,” he says. “If rates were to increase much more significantly, that would be more problematic.
“But this recession was very different from past economic events.
“Cash balances are very strong and they usually aren’t. There is a lot of liquidity in the system and asset prices have gone up versus down. “
But even a modest rate move in the SME market – especially if it did not coincide with a simultaneous increase in the RBA’s cash rate – would certainly test the patience of Australian business owners even more. all major banks.
Former NAB bankers Joseph Healy and David Hornery created Judo Bank in 2015 to focus on SME lending and “relationship banking”. They argued that Australian banks had disengaged and would only provide loans secured by residential properties.
Strong dependence on property
A plethora of fintechs are also constantly choking traditional banks, promising much faster, more flexible, and cash-flow loans.
NAB still clings firmly to its claimed title as an Australian merchant bank. It increased its market share slightly over the past year despite CBA’s strong push into investment banking, complemented by the focus on technology.
The strong results in business loans for both were also helped by the lack of traction at Westpac, with its management still distracted by regulatory issues and legacy issues.
But keeping up with and beating the growing competition and changing demand won’t be easier. Irvine says he’s been a relationship banker his entire career and the importance of that won’t change. As a transplanted Canadian, however, he is amazed at Australia’s heavy reliance on property as collateral for business loans.
According to Irvine, it makes sense that this type of secured loan has made up a large part of NAB’s portfolio, especially since the Australian economy has been skewed in favor of physical assets.
But he wants to use technology and transaction and accounting data much more to assess risk rather than necessarily using a mortgage as collateral for a loan.
“As Australia moves towards a more knowledge-based economy with more innovation, businesses more reliant on cash flow, you see a lot of emerging and innovative technological capabilities,” he says.
“I think there is so much more we can do to continue to innovate and provide different sources of funding where it makes sense. So I would like to see the total mix of my book shift to the margin of home loans. “
One of the results is NAB’s relaunch of its unsecured business loan product, QuickBiz. This includes approving loans of up to $ 250,000 for existing clients within 20 minutes, including depositing the money into a client’s account.
Irvine would like to extend this option to new clients, increase the funding limit, and make the whole process even faster – maybe 10 minutes.
The race for small business loans is on. Most business owners will say it’s about time.