Bank business clients proving resilient, despite rates
Australia’s largest bank has expanded its access to the job market and said the sector was doing well, especially in the regions, despite the threat of higher interest rates ahead.
Commonwealth Bank of Australia this week said it had increased its share of the sector to 26.9 per cent, eight percentage points ahead of its next commercial bank rival.
This potential customer provides CBA with large numbers of business deposits and opens channels for further lending to businesses.
It also gives the bank information that helps determine where it should focus on improving loans.
“There’s an incredibly benign environment at the moment,” CBA commercial bank chief Mike Vacy-Lyle told AAP.
“We are incredibly pleased with the credit quality of the portfolio.”
Mr Vacy-Lyle said the bank’s business had grown at 1.3 times the market rate, meaning it was above the average growth of the business banking market as a whole.
“So we were able to navigate the credit environment safely,” he said.
But interest rate storm clouds remain ahead after the central bank raised interest rates for the first time in two years in early February.
More increases are on the way, with economists predicting a new increase in early May.
Last time, the business sectors most stressed included housing developers, builders and discretionary retail (nice to have but not essential goods and services).
CBA is monitoring the situation closely, particularly in the agricultural sector and in Victoria, which is facing another summer of bushfires and still experiencing drought in some areas.
“It’s been devastating for a lot of people out there and it’s a big concern for us and the drought is ongoing so we’re a little concerned about that,” Mr Vacy-Lyle said.
CBA is also watching Melbourne as business confidence is up and down in Victoria, where the incumbent Labor government is under pressure.
“We will need to monitor some hospitality businesses in the city of Melbourne,” Mr Vacy-Lyle said.
“We’ll need to look at your second-tier commercial property locations like Melbourne, maybe monitor that as we move into a cycle of rising rates.”
Further afield, businesses in the Australian region are proving resilient, CBA’s data shows.
Good growth is being seen in the Queensland and Western Australia region, and growth continues in regional NSW and even parts of Victoria.
“You know, the fact that these regions are outperforming the metros, that kind of sentiment is really justified and appears to be continuing,” Mr. Vacy-Lyle said.
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