Reading through the AFR this morning I can’t help but think that the NAB spin machine is working hard. In Matthew Drummond’s article NAB holds its nerve on rates it is implied that NAB is under pressure from Westpac and CBA who are stealing business clients by the truckload. George Liondis then goes on to recount Cameron Clyne in Rivals step up race to topple bank who also implies that they are under assault without naming the culprits. My observation is that this is not the real story.
I would be genuinely surprised if Westpac had written a new to bank deal in nearly 2 years. CBA would be writing a fair bit but this would be mainly property related transactions. However NAB’s biggest problem, and the main reason, I suspect, why business lending is down 1.6% is due to natural attrition of the book, and a credit department that is too cautious to approve new deals fast enough to replace it. It is unlikely to be anything to do with an increased interest by competitors. There is nothing wrong with demand for business credit – I am seeing plenty of businesses every week looking for more. What is wrong is that very few, if any, credit departments are willing to approve new deals. The process for dealing with a bank is slower than in any other time in history potentially. The first bank to wake up to this and to start moving at a decent pace will dramatically increase market share. They don’t even need to drop prices. The rest of the market is that asleep that for most business customers just getting a bank that responds quickly to requests would be reason enough to incur the transfer costs and move banks. Cameron Clyne goes on to observe that banks are doing crazy things with rates in business banking. NAB has always priced at the higher end of the scale, valuing their relationship value adds more than the other banks. This is not new. In spite of this, NAB has grown to hold the largest market share. With a large market share comes a large attrition rate that needs replenishing as every day clients are paying down loans per scheduled principal reductions. If NAB does not write enough new business to replace this their book will reduce, and their income will reduce accordingly. Market share is probably remaining constant as none of the other banks are writing new business either so all are experiencing decline at the same rate. If NAB Execs want to fix this, speed up your decisioning turnaround and comfort your credit departments! It wouldn’t be hard to do a lot better than the competition….