Fewer banks chasing Corporates
(11 February 2009 – Australia) East & Partners’ latest Corporate Banking Markets Report points to a slowdown in business banks’ efforts to win over middle market customers, despite strong demand for growth among these businesses.
In July 2008, about two out of three Corporates (businesses turning over between A$20 and A$340 per annum) said they experienced a competitive pitch from a rival business bank.
"This charm offensive is grinding to a halt, with the share of businesses reporting no approaches from a competitor bank increasing from 33.9 to 58.7 percent during the half year to January 2009," said East & Partners’ financial markets analyst Zoran Knezevic.
"Competitive pitching offers a clue about the banks’ appetite for new business and these latest results reveal some banks are reining in their sales efforts."
Associated with this, there has been a big drop in the share of Corporates thinking about changing their primary business bank, suggesting these businesses may be looking to consolidate banking relationships.
"This implies there is a direct link between churn intentions and pitching. Moreover, as customers look to consolidate their relationships, banks have an opportunity to become more entrenched with key customers," Mr Knezevic added.
"Moving to capture a greater share of customers’ wallet and product cross promotions therefore seem timely, with Corporates continuing to express a healthy appetite for bank services."
East’s report shows that forward borrowing intentions in the Corporate segment continue to climb, against a backdrop of a systemic fall in business lending.
Given that the demand for business lending remains healthy, these results suggest that the market-wide contraction in business lending appears to be supply driven.
East & Partners will be discussing this issue at length in its upcoming Research Note, which is due out later this month.
"This charm offensive is grinding to a halt, with the share of businesses reporting no approaches from a competitor bank increasing from 33.9 to 58.7 percent during the half year to January 2009," said East & Partners’ financial markets analyst Zoran Knezevic.
"Competitive pitching offers a clue about the banks’ appetite for new business and these latest results reveal some banks are reining in their sales efforts."
Associated with this, there has been a big drop in the share of Corporates thinking about changing their primary business bank, suggesting these businesses may be looking to consolidate banking relationships.
"This implies there is a direct link between churn intentions and pitching. Moreover, as customers look to consolidate their relationships, banks have an opportunity to become more entrenched with key customers," Mr Knezevic added.
"Moving to capture a greater share of customers’ wallet and product cross promotions therefore seem timely, with Corporates continuing to express a healthy appetite for bank services."
East’s report shows that forward borrowing intentions in the Corporate segment continue to climb, against a backdrop of a systemic fall in business lending.
Given that the demand for business lending remains healthy, these results suggest that the market-wide contraction in business lending appears to be supply driven.
East & Partners will be discussing this issue at length in its upcoming Research Note, which is due out later this month.
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