Bankers in major banks (ne all banks) are pushed very hard and are forced to give their employer more than a pound of flesh. However the last couple of years have frustrated banking’s frontline. Believe it or not, most bankers get into banking because there is an element of doing community good in what we do. When you help a business by financing their investments and facilitating growth and success, you feel great. You have made a difference.
However in the last couple of years, the brief from above has been conflicting. Meet your profit targets, but don’t lend money to new clients (unless they are amazing businesses with zero chance of default or loss). Relationship management have been the ones delivering the “no” regularly to finance requests from existing and new clients (even when they believe strongly in the applications) and then, often at the same time, delivering price increases which are the only alternative to cover declining loan portfolios which are not getting topped up by new lending so are naturally losing revenue/profitability. The bankers have been lucky that the environment has allowed then to creep margins up, as without this bonuses would have been scarce.This is not why bankers got into banking for the most part, and there are a large number of frustrated employees out there itching to get back to helping businesses move forward.Now credit teams are still ferociously powerful and difficult to convince to approve new business. The times are uncertain and many corporates are still challenged by the environment. The bankers are looking at their new budgets for the 2011 financial year just started and wondering how the hell they are going to get there.
The RBA is on to this. They’ve come out this week and poo pooed the banks thinking about putting up rates, clearly sensing that bank’s leaning towards taking the easy way out of their dilemma. But the banks are in a corner and are naturally pushing back.
The recent Senate inquiry into Small Business lending gave the Government little in the way of options to drive increases in financing to this sector. Quite rightly you can’t force banks to lend, especially to a sector that is a higher risk segment of the finance market. However perhaps the Government can increase the appetite of banks here by increasing pressure to not lift rates beyond the RBA.
Perhaps we will then get a situation where the banks have to start writing new loans to make their budgets.