Bank business clients proving resilient, despite rates
Kaaren Morrissey |
Australia’s biggest bank has extended its reach into the business market and says the sector is doing well, particularly in the regions, despite the threat of higher interest rates down the track.
Commonwealth Bank of Australia revealed this week it had increased its share of the sector to 26.9 per cent, more than eight percentage points ahead of the next business bank competitor.
That lead delivers CBA a lot of business deposits and opens up channels to more lending to businesses.
It also gives the bank insights, which helps identify those it should be focusing on increasing lending to.
“At the moment, it’s an incredibly benign environment,” CBA business bank head Mike Vacy-Lyle told AAP.
“We are incredibly pleased with the credit quality of the portfolio.”
Mr Vacy-Lyle said the bank’s business arm has grown to 1.3 times market system, which means it’s sitting above the average growth of the business banking market as a whole.
“So we’ve been able to safely navigate the credit environment,” he said.
But interest rate storm clouds lie ahead after the central bank earlier in February raised rates for the first time in two years.
More rises are on the way, with economists tipping another hike as early as May.
Last time, the business sectors most under stress included residential developers, builders, and discretionary retail (nice to have but not essential goods and services).
CBA is watching closely, particularly in the agricultural sector and in Victoria, which has suffered another summer of bushfires and is still experiencing drought in some areas.
“It’s been devastating to many people … there and that’s been a big concern of ours, and that drought persists, so we are a little bit worried about that,” Mr Vacy-Lyle said.
CBA is also watching Melbourne, given business confidence has been up and down in Victoria, where the incumbent Labor government is under pressure.
“We are going to need to watch some of the hospitality businesses … in the city of Melbourne,” Mr Vacy-Lyle said.
“We’ll have to look at your second-tier commercial property places like Melbourne, maybe watch that as we enter an increasing rates cycle.”
Further afield, businesses in regional Australia are proving resilient, according to CBA’s data.
It’s seeing good growth in regional Queensland and Western Australia and continued growth in regional NSW and even parts of Victoria.
“You know, this phenomenon of the regions outperforming the metros – there really is merit in that sort of sentiment, and it seems to be continuing, Mr Vacy-Lyle said.
AAP
