SMEs account for only 15% of new lending

Article in today's Australian by Michael Bennett


Banks vie for credit growth as non-mining sector picks up

The nation’s biggest banks are jostling for a bigger slice of the business lending market as analysts tip a solid year of credit growth as the non-mining parts of the economy improve.

After two months of healthy demand, business credit growth flatlined in November, dragging down annual growth to 6.2 per cent, from 6.6 per cent, according to latest Reserve Bank data.

But apart from October and September, 6.2 per cent remains the strongest since February 2009 and economists expect the revival in recent months hasn’t petered out.

Even so, the latest figures compare to the peak in December 2007 of 24 per cent, the strongest since the prior boom in December 1988. In contrast, demand bottomed in November 2009 at negative 7.5 per cent and remained muted until recently.

Our perspective:

Per the RBA, as at Sept 2015 and published on 17 Dec, total business lending was up a healthy 9.6% to $857bn.

85% of the $75bn growth was in loans over $2m which totalled $596bn as at 30 Sept.

Of the $75bn in growth, 40% came from 'Other' industries.

Finance and insurance accounted for 25%, Wholesale trade, retail and transport 18%, Construction 6%, Manufacturing 10%, Mining 0%, Agriculture 1%.

Lending in the critical $500k - $2m bracket - ie SMEs - grew by 5.1%. How much of all of this was mortgage lending? We do not know.

Basel III regulatory capital rules favour mortgages 4x more than business lending. As a result, our banks behave like building societies - understandably.

The Fintech sector can fill the gap but it needs to become much bigger to move the needle on growth.