NAB and small businesses: many are waiting weeks, sometimes months, to get an answer

The fight NAB business banking has to have

National Australia Bank (NAB) has vowed to fight to fend off peers that threaten its status as Australia’s biggest business bank but insiders say the battle lies internally.

When new boss Andrew Thorburn announced another disappointing result for the last financial year on 30 October, he identified reviving business banking as a strategic priority. He knows as well as anyone that restoring business banking to its former might is critical to pulling itself up from the bottom of the banking ladder.

Thorburn said the bank would add 100 frontline bankers to its team of 4,048, as well as extra mobile bankers and product sales specialists. This is part of NAB’s focus on areas it believes it has a competitive advantage.

Along with home loans, these include lending to small and medium-sized businesses (SMEs) and specialist business lending, comprising agribusiness, health, government, education and community.

In 2013 ANZ pledged to lend small businesses $1 billion over the course of that year. It followed up in March by pledging to lend a further $2 billion to new small businesses in 2014.

Last Monday, NAB trumped this with the launch of its self-described “aggressive” new marketing campaign in which it committed to lend $1 billion every month to Australian businesses.

Neil Slonim, a former NAB executive who now runs his own banking advisory and advocacy practice, pointed to some revealing statistics in the results presentation pack that raise questions about NAB’s ability to deliver on that pledge.

Cutting staff, losing customers

Its market share with SMEs turning over less than $1 million per annum has fallen from around 25 per cent in September 2013 to around 20 per cent.

Market share of SMEs with revenue between $1 million and $5 million has fallen from approximately 27 per cent to 23 per cent and the share of business with SMEs turning over between $5 million and $50 million has fallen from around 33 per cent to about 28 per cent.

“That is 20 per cent market share losses in 12 months which is pretty significant,” said Slonim.

Another slide showed that NAB’s customer satisfaction levels among businesses turning over between $1 million and $5 million has fallen significantly in the last six months and is the lowest of the big four.

It also ranks last and second-last with businesses with annual revenue exceeding $50 million and between $5 million and $50 million, respectively. NAB’s net promoter score across nine of its key segments is -10, again putting it in third place.

The deterioration in market share and satisfaction levels coincided with a 20 per cent drop in business bankers from around 5,076 in FY12 to 4,048. As a result of the job cuts and restructuring, 200,000 business customers have had their relationship managers changed, according to Slonim, which explains the exodus from NAB.

It isn’t due to other banks offering a better proposition but because customers have had enough of NAB, said Slonim. “That is why the challenge is internal.”

“When you cut 20 per cent of your staff, lose 20 per cent of your customers and satisfaction is down you are doing something wrong and it can’t be blamed on competitors,” he said.

Cumbersome lending practices

In his opinion, NAB is paying the price for the heavy cost-cutting and under-investment in what was traditionally its engine room. The fact NAB is looking to recruit 100 new business bankers indicates it has cut too deeply.

However, good business bankers aren’t easy to come by and it will take time to induct young and inexperienced bankers into NAB’s processes and culture.

Feedback Slonim has received from SMEs indicates many are waiting weeks, sometimes months, to get an answer. That’s during a period of sluggish demand for credit.

Certainly when Thorburn talked about the need to address customers’ pain points, he conceded business lending practices are “cumbersome”.

Slonim said NAB’s lending practices and processes are going to have to be substantially improved if it is to execute on its $1 billion per month lending commitment.