Brokers squeeze banks on business lending
(13th January 2004 – Australia) Australia’s mid-corporate business sector (A$20-100 million turnover) is increasingly looking to third party business brokers and consultants as a source of business loans, East & Partners has found.
East’s research reveals that brokers comprise about 18 percent of the lower half of the mid-corporate – or commercial – market ($20-50 million turnover) compared with just seven percent a year ago.
Some 4.7 percent of the $51-75 million turnover segment looks to third party providers for loans compared with 2.9 percent 12 months ago, while 2.5 percent of companies turning over $76-100 million now use intermediaries.
East principal analyst Paul Dowling said this trend was likely to continue throughout 2004, predicting the figure could reach as high as 28 percent by year’s end.
"Expectations are growing that similar forces are at work in the lower end of Australia’s business banking markets as have been seen in the residential mortgage market with increasing numbers of customers turning to third party channels and brokers for guidance and solutions on their core term lending needs," he said.
"Although there is some overlap in the players involved in the emerging brokerage channels for business lending, the majority of brokers are different to those traditionally active in residential mortgage space.
"East’s market analysis suggests that as term Australian dollar lending has become increasingly commoditised for good quality borrowing credits, consultants and advisors have become more solutions orientated in actually delivering and arranging lending packages," Dowling said.
He said there was clear evidence that commercial customers were starting to differentiate lending from other banking needs.
"The banks clearly need to be wary of this as it concerns the heart of their businesses," he said.
Some 4.7 percent of the $51-75 million turnover segment looks to third party providers for loans compared with 2.9 percent 12 months ago, while 2.5 percent of companies turning over $76-100 million now use intermediaries.
East principal analyst Paul Dowling said this trend was likely to continue throughout 2004, predicting the figure could reach as high as 28 percent by year’s end.
"Expectations are growing that similar forces are at work in the lower end of Australia’s business banking markets as have been seen in the residential mortgage market with increasing numbers of customers turning to third party channels and brokers for guidance and solutions on their core term lending needs," he said.
"Although there is some overlap in the players involved in the emerging brokerage channels for business lending, the majority of brokers are different to those traditionally active in residential mortgage space.
"East’s market analysis suggests that as term Australian dollar lending has become increasingly commoditised for good quality borrowing credits, consultants and advisors have become more solutions orientated in actually delivering and arranging lending packages," Dowling said.
He said there was clear evidence that commercial customers were starting to differentiate lending from other banking needs.
"The banks clearly need to be wary of this as it concerns the heart of their businesses," he said.
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