Business Bankers Brace for Margin Crunch
(20 March 2024 – Australia) ANZ has joined the fray with CBA and NAB for business banking supremacy with the release of its new ANZ Plus digital platform for commercial enterprises.
ANZ has integrated its private bank into the commercial segment to improve service for high-net-worth individuals (HNWI) operating a business as the group opens up its ANZ Plus platform to business.
“There’s an opportunity for us to have small businesses on Plus. I don’t have timelines at the moment, but we’re doing scoping work” ANZ Group Executive, Australia Commercial, Clare Morgan commented to the AFR.
Lucas Baird reports that brokers across commercial lending and asset finance are preparing for extreme margin compression not dissimilar to the “mortgage wars” that ran through to 2023. This period was marked by elevated competition between banks underpinned by low funding costs and strong refinancing activity as Macquarie also expands into business lending alongside challenger bank Judo and quickly growing non-bank providers.
“Only 20 to 25 percent of small business customers actually borrow money. The relationship with a small business is less transactional than with a mortgage customer. There is far less split banking. They have a merchant device with you, asset financing on a piece of equipment, deposits and even a home loan. It is not immune to competitive pressures, but there’s some protection from that” Morgan added.
“Small business banking, in particular, is beginning to look crowded. When everyone has the same and really not that original idea at once, it tends to compress returns. The risk is that the banks again compete away the wider business banking returns. With slowing business credit growth, compressing asset spreads and rising funding costs, the risk is that the banks again compete away the wider business banking returns. This may be just like what has happened in retail banking” commented Citi Head of Australian Banks Research, Brendan Sproules.
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