East predicts 2.8 percent business credit growth 2013
East highlighted the results of its Deposit Funding and Debt Index (DFDI), which showed in September that micro businesses had a DFDI ratio of 2.73, and are depositing $2.73 for every $1 they borrow from the banking system. SME’s are depositing $2.46 for every dollar borrowed, but at the larger end of town the situation is reversed, with both corporate and institutions being net borrowers. Corporates had a DFDI of 0.87, with institutional customers at 0.45.
East’s research also showed that the DFDI ratio for SME’s looks to be at an inflexion point and falling, suggesting the segment had come to the end of its de-leveraging cycle.
The quarterly update reviewed the 2013 outlook for business credit, with 5.6 percent of SME’s and 6.6 percent of corporate indicating they have planned new borrowings in the next six months – the lowest result for both sectors in four years.
The Institutional segment is showing sharply stronger borrowing intentions over the coming six months, with 7.0 percent of institutional respondents indicating they planned new borrowings.
Based on these figures, East is forecasting an overall 2.8 percent increase in business credit across the board over 2013.
In other findings presented at the markets update session:
-
Businesses are moving out of At Call deposits and into Term depositing, although preferring short tenors of between three and six months
-
Churn ratios in Call deposits are accelerating, with 41.9 percent of business customers across all segments planning to switch in the coming months, while 38.6 percent executed a switch last month. Consumers are showing similar deposit switching aggression with differential rate triggers encouraging a switch of 42.9 percent of the total market in the coming month
- Business expects the Australian dollar to appreciate in the first half of 2013 before falling slightly, but both importers and exporters believe the AUD will remain above parity through to the end of 2013 at an average of 1.014 by the end of June 2013. Importers are most bullish on the AUD, forecasting a level of 1.019 against the USD by the end of 2013
East & Partners’ Head of Markets Analysis Lachlan Colquhoun commented, "This
quarterly update on Australia’s banking markets catches the market at a very
interesting inflection point, particularly in the results for Micro businesses
and SME’s.
"While Micros show no sign of ending their de-leveraging, SME’s are at a clear
switch point and may well have turned the corner, with DFDI levels on the way
down. The next quarterly result for SME’s will be a telling one."
"The overall message though is that the appetite for new borrowings is still
low, and our 2.8 percent forecast for business credit expansion over 2013 is
anaemic by any standard."
East & Partners will be holding quarterly Market Updates with the next Market
Update scheduled for February 2013. These updates provide a series of snapshots
of the current banking markets, and unique market segments.
Sources:
East & Partners Deposit Funding & Debt Index Report (October 2012)
CBA Aussie Dollar Barometer
East & Partners Business Banking Index
Note: Business Depositor Segments:
› Institutional – A$530 million plus
› Corporate – A$20-530 million
› SME – A$5-20 million
› Micro – A$1-5 million
For more information or for further interview based insights from East &
Partners on this DFDI Index, please contact:
Sian Dowling
Marcomms & Client Services
East & Partners
t: 02 9004 7848
m: 0420 583 553
e: sian.d@eastandpartners.com
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