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Block on credit a furphy, says CBA

Block on credit a furphy, says CBA
ONE of the Commonwealth Bank's most senior bankers has slammed suggestions the banks are constraining growth by not providing credit to small businesses, saying the nation's largest lender has not changed its criteria and is keen to put more capital to work as competition heats up.

Grahame Petersen, head of CBA's business and private banking unit, said the bank's lending policies had not changed since the global financial crisis, and business credit growth was historically low because companies were not taking on as much debt.

But some analysts have pointed the finger at the banks, arguing they are cherry picking clients amid a drop-off in risk tolerance since the GFC.

"Smaller businesses have more adversarial relationships with their banks, find it harder to get credit and feel under-serviced in comparison with larger enterprises," analysts at East & Partners said last year, adding it was partly because of the terms and conditions imposed.

Mr Petersen, who reports to CBA chief Ian Narev, said the business banking market remained intensely competitive, with every institution fighting to lend amid hopes the borrowing strike of the past few years would end. "Where would the logic be for any enterprise to say: 'No I don't want to do business?' "

"We're not capital constrained, we're not constrained by credit policy; we've been very consistent with our clients and our approval rates are relatively similar (since pre-GFC) and we're very keen to do business.

"The reality is if you look at any of the data out there, pre-GFC roughly two-thirds of business enterprises borrowed or had some form of debt, and now post-GFC the number is around 30 per cent."

According to RBA data this week, business credit declined in November and is up just 1.9 per cent year on year.

Goldman Sachs economists described business borrowing as anaemic and noted three-month annualised credit was contracting for only the fourth time in the past 27 months.

Westpac chairman Lindsay Maxsted, speaking at a conference late last year, acknowledged the banks got a jolt in the wake of the GFC and might have pulled lending back too far.

"We would say we were open for business all the way through but you're not the first person that's put it to me that that's not the case, so I suspect there's an element of being right in both cases," he said. "But it all comes down to creditworthiness."

Mr Petersen, who agreed with other bankers that confidence had improved but businesses had not yet started borrowing more, said it was critical to back the right customers. "If you turn up today and you've never been in mining services (for example) and you've got a highly leveraged company working out the back of your garage, we're better off making a donation to the Smith family, versus people who have got experience, they've got a good corporate structure, a reasonable financial position," Mr Petersen said.

"That's always been the same."

 Author: MICHAEL BENNET  
Source: The Australian
Last modified onSunday, 05 January 2014 06:31

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