Big businesses less happy with debt offering
According to East & Partners’ Institutional Banking Markets report there has
been a twofold increase in the share of Australia’s top 500 businesses which are
planning to raise more bank debt.
In April this year, only 16 percent of Institutional businesses had definite
plans to raise more debt in the coming six months. This number increased to 38.1
percent in October.
"The surge in the appetite for bank debt does not come as a surprise," said East
& Partners’ financial markets analyst Zoran Knezevic.
"Big businesses have in effect been pushed back to bank debt as the capital
markets froze in the wake of the US sub-prime mortgage crisis," Mr Knezevic
added.
"What is surprising is that these businesses, which are increasingly drawing on
credit lines from their bank, have become less satisfied with the debt products
offered to them," he continued.
"This is the first market-wide decline in customer satisfaction with debt
products in the six years East has been monitoring these metrics," Mr Knezevic
added.
Customer satisfaction has fallen visibly in both the short term and long term
domestic debt product markets, even as the importance of these products to top
500 businesses continued to climb.
The drop in customer satisfaction with domestic debt products coincides with a
decline in satisfaction in some of the most important areas of service delivery,
including loyalty to the customer and value for money.
Better pricing has jumped visibly as the primary driver of customer churn with
nearly a third of the businesses in the Institutional segment saying that better
pricing is their primary motive for changing banks. Similarly, satisfaction with
banks’ loyalty to the customer relationship has fallen, amid growing customer
calls for greater flexibility on product terms.
"Due to the higher funding costs experienced by banks and the general shift to
risk aversion in the credit market, it is clear that the pricing and the terms
on debt are not what they used to be one year ago."
"The top 500 businesses are seeing this as a drop in loyalty and competitive
pricing being offered by their lenders," Mr Knezevic said.
"What this means is that there are growing opportunities for lenders which are
daring enough to break the ranks and offer competitive pricing along with more
flexibility on terms," he concluded.
About East & Partners’ Australian Institutional Banking Markets Program
Australian Institutional Banking Markets is an ongoing six-monthly research
program delivering detailed analysis of the demand for debt, treasury and
corporate advisory banking services among Australia’s top 500 companies by
revenue. The program is based on structured interviews with some +/-450
enterprises every six months and includes a range of analytics such as product
engagement, market share, wallet share, mind share and panel positioning. The
program also monitors customer satisfaction experiences across a range of
product and relationship banking attributes.
For more information, please contact:
Zoran Knezevic
Financial Markets Analyst
East & Partners
t: 02-9004 7848
m: 0409 129 599
e: zoran.k@eastandpartners.com
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