Latest / Best of Business / Antonia Watson: ANZ CEO on the bank lending less to businesses than it did five years ago

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Antonia Watson: ANZ CEO on the bank lending less to businesses than it did five years ago · Best of Business

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  Speaker 1: You're listening to a podcast from News Talk ZEDB. Follow
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  Speaker 2: Let's pick up where we left off last week on
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  Speaker 2: small business lending. Figure show is softening across all bank
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  Speaker 2: business lending A and Z our biggest bank, of course,
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  Speaker 2: actually going backwards on that. Overall the growth rates dropped
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  Speaker 2: from six percent in twenty thirteen. This is for everyone,
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  Speaker 2: not just ANZ six percent in twenty thirteen to one
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  Speaker 2: and a half percent. So what's going on here? Antony
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  Speaker 2: Watson is the CEO of A n Z and is
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  Speaker 2: with us.
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  Speaker 3: Good morning, Good morning Mike.
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  Speaker 2: Is there a thing or not?
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  Speaker 3: Well, there's a thing which I can explain. But the
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  Speaker 3: thing that I'm delighted to be able to tell you
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  Speaker 3: is that we are growing and have been growing lending
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  Speaker 3: to small and medium businesses and that's been despite there's
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  Speaker 3: been a lot more non bank lender activity. I can
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  Speaker 3: explain why why the reduction if you want me to
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  Speaker 3: at selling you DC was the first thing that we
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  Speaker 3: did in twenty twenty, and then the big impact really
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  Speaker 3: has been a drop and lending to commercial property now
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  Speaker 3: there's several reasons for that. You've got developments that would
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  Speaker 3: sort have been done as interest rates were lower, that
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  Speaker 3: then completed and then got paid off, and in that
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  Speaker 3: period of time you had interstrate interest rates increasing times
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  Speaker 3: got tougher, so not so much new demand. And our
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  Speaker 3: decision so that this was our decision was to support
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  Speaker 3: our existing customers as interest rates are increasing and things
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  Speaker 3: are getting tougher, rather than taking on new new customers.
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  Speaker 3: So the big drop in our lending has been from
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  Speaker 3: property as opposed to smaller medium businesses.
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  Speaker 2: Okay, are you taking on new customers now?
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  Speaker 3: Absolutely. We've had seven thousand customers sign up in the
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  Speaker 3: first half to our how to campaign, and that's a
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  Speaker 3: campaign about helping you know, you've got this this thing
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  Speaker 3: about you've got to get through the first two years
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  Speaker 3: when you're a new business. We've got that's helping them
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  Speaker 3: get through that first two years.
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  Speaker 2: Okay. And are those people new clients or people who
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  Speaker 2: had borrowing elsewhere and came to you just in a
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  Speaker 2: competition type way, that there would be.
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  Speaker 3: A mix and it will be new startups and reasonably
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  Speaker 3: new businesses. That was part of the part of the
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  Speaker 3: requirements for the package.
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  Speaker 2: Okay. Part of the explanation last week seemed to be
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  Speaker 2: that there are rules that you guys have to carry
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  Speaker 2: extra capital to back up business lending. Is that true?
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  Speaker 2: And if it is true, how much of it is it?
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  Speaker 2: And is it a burden?
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  Speaker 3: So yes, it's true. Exactly how much it is I
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  Speaker 3: couldn't tell you off the top of my head, because
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  Speaker 3: it's once again into business leanding. It's very risk based
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  Speaker 3: and it depends on the individual business. But it is
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  Speaker 3: risky a lending to businesses, the lending to householders who
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  Speaker 3: have a home and good equity in their home to
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  Speaker 3: back up for lending. So that's the reason we hold
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  Speaker 3: more capital. It isn't a constraint. We're not constrained with
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  Speaker 3: our capital. We don't sit there and think we'd rather
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  Speaker 3: do lending to housing into businesses. We're open to both.
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  Speaker 3: We are interested in leanding to anyone who's got a
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  Speaker 3: good plan that shows that they can pay us back
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  Speaker 3: over time.
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  Speaker 2: Right, I'll come back to the plan thing in a moment.
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  Speaker 2: Would you be generally thinking that this view that you
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  Speaker 2: hold is the view of all the major banks in
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  Speaker 2: the country in terms of lending to business overall?
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  Speaker 3: I would suspect so yes, And that you do have
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  Speaker 3: to look through the numbers. You know, the Reserve Bank
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  Speaker 3: numbers that they publish are reasonby blunt because they're at
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  Speaker 3: at noble business. They're well. Another thing that you know
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  Speaker 3: we see in our portfolios are lending to very large institutions.
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  Speaker 3: I think we've been out had about seven billion dollars
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  Speaker 3: out since the time I joined the bank sixteen years ago.
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  Speaker 3: Because as soon as your lending gets to say one
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  Speaker 3: hundred two hundred million dollars, you want to syndicate that
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  Speaker 3: amongst a lot of banks so that you're still spreading
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  Speaker 3: the risk, and often you'll get them to borrow their
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  Speaker 3: own money in the debt capital market. Good.
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  Speaker 2: I'm glad to hear this explanation because what I couldn't
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  Speaker 2: work out in the numbers is that there seems to
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  Speaker 2: be and in fact, I know there's a record number
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  Speaker 2: of business sales in this country. There's never been more
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  Speaker 2: interested in buying businesses. And I'm assuming some of those
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  Speaker 2: people at least need to borrow from banks and therefore
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  Speaker 2: are borrowing to buy businesses.
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  Speaker 3: Yes, but I think the thing to remember there is
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  Speaker 3: the difference between equity and debt funding. So the first
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  Speaker 3: thing you need is you need some cattle behind you,
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  Speaker 3: because the minute you take on the debt, you're having
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  Speaker 3: to pay interest on that. So, you know, we see
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  Speaker 3: businesses that are undercapitalized, and it's important that you also
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  Speaker 3: have their equity behind you when you start a business
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  Speaker 3: as well.
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  Speaker 2: Okay, one of the criticisms we got when we raised
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  Speaker 2: this last week was raised last week was that there's
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  Speaker 2: no one in the bank. And this is not necessarily
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  Speaker 2: you specifically, but it's banks generally that aren't business specialists.
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  Speaker 2: In other words, you do it all by a computer.
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  Speaker 2: You tap in a few numbers and some answer comes
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  Speaker 2: back and you've got it all you haven't got Is
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  Speaker 2: that true or not?
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  Speaker 3: We have? Oh, I can't give you the number of
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  Speaker 3: top of my head, but we have many business specialists
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  Speaker 3: who are sitting ready to help our customers. And if
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  Speaker 3: they feel like they're not getting to help, they need
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  Speaker 3: get them to email me.
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  Speaker 2: Right, So there are people right broadly speak at mortgage rates.
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  Speaker 2: Where are we heading? What do you think for July
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  Speaker 2: and August on the Reserve Bank? Go on, give us
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  Speaker 2: the big big economic read here, Antonia.
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  Speaker 3: I don't know. I know that Sharon Zolner is saying
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  Speaker 3: that they're probably might be seeing some more decreases. The
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  Speaker 3: problem is you've got this uncertainty and got it in
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  Speaker 3: speaking about business. Uncertainty is the worst thing for business.
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  Speaker 3: I mean, could the current situation in the Middle East
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  Speaker 3: increase oil price doesn't have a knock on effect and
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  Speaker 3: suddenly we've got inflation again and can't lower rates. Or
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  Speaker 3: could it lead to a recession and therefore they do
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  Speaker 3: lower rates to simulate the economy. I just you haven't
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  Speaker 3: seen the situation with us much uncertainty.
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  Speaker 2: I think maybe would you at a drink after work
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  Speaker 2: when they go well what's new Zealand feel like, what's
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  Speaker 2: your answer? What's the word you were using?
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  Speaker 3: My answer is sort of green shoots, but uncertainty. So
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  Speaker 3: I think the situation we're in now is that whilst
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  Speaker 3: we can see some improvement, you can see milk prices
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  Speaker 3: and agree and interest rates coming down, so people have
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  Speaker 3: got more money in their pockets. I think we've just
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  Speaker 3: not quite got the confidence because of that uncertainty to
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  Speaker 3: spend it on going out to dinner, or spend it
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  Speaker 3: and on investing something in your business.
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  Speaker 2: Yeah, good insight apprechect time as always Antonia Watson. Hopefully
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  Speaker 2: that at least most of our questions.
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