From today's Fin Review online
Westpac targets small business
Mar 28
Joyce Moullakis
Westpac Banking Corp plans to hire 100 business bankers and boost branch efficiency as it seeks to accelerate its below-average growth in loans to small and medium-sized companies in the second half.
The bank has also approved a proposal to lend up to 85 per cent of the value of a property without insurance for borrowers prepared to pay 0.3 percentage points above the standard interest rate.
The standard loan-to-valuation ratio (LVR) in the mortgage industry is 80 per cent.
Consumer and business banking head Michael Pratt said while Westpac had met or exceeded industry growth rates at the institutional or top end of the business lending market, the bank still trailed its peers in the middle and smaller business segments.
Following the implementation of the bank's loan process re-engineering program, Pinnacle, MrPratt set a target to at least meet industry growth rates in business lending in the six months to September 30.
Macquarie Securities' data showed that, for total business lending, Westpac reported a three-month growth rate of 7.7 per cent, annualised in January. That compared with a 13.3 per cent average for listed banks.
Mr Pratt said he believed there would be upside from improved productivity in bank branches and as Westpac increased its number of business bankers.
The bank hired 280 commercial bankers and customer managers last year and plans to hire at least another 100 over the next 12 months.
Mr Pratt also said Westpac was now writing about 5 per cent of its new business loans through brokers.
"That's a channel that we need to be in otherwise we're placing ourselves at a disadvantage relative to the other major banks," he said.
The bank has not changed its loan approval thresholds for business bankers since implementing the Pinnacle program in September.
However, Mr Pratt said he was reviewing the bank's position on low-documentation loans, including meeting aggressive competitors such as the Commonwealth Bank of Australia on pricing.
"Our experience over the past 12months has been good in terms of delinquency rates and the like not concerning us," he said.
Low-doc loans require less paperwork and typically allow borrowers to self-verify their income.
Mr Pratt also said the bank was comfortable allowing LVRs of 85per cent, and that other banks were approving similar loans on negotiation with the borrower.
"We are simply going above the line to be public about it but we are doing it with a 30 basis point premium," he said.
"We are very confident that we are not in anyway driving into a risk position that we are uncomfortable with."
Analysts at Macquarie estimated that, in a worst-case scenario, the increase in bad and doubtful debts would only amount to between $7million and $10 million.
Westpac targets small business
Mar 28
Joyce Moullakis
Westpac Banking Corp plans to hire 100 business bankers and boost branch efficiency as it seeks to accelerate its below-average growth in loans to small and medium-sized companies in the second half.
The bank has also approved a proposal to lend up to 85 per cent of the value of a property without insurance for borrowers prepared to pay 0.3 percentage points above the standard interest rate.
The standard loan-to-valuation ratio (LVR) in the mortgage industry is 80 per cent.
Consumer and business banking head Michael Pratt said while Westpac had met or exceeded industry growth rates at the institutional or top end of the business lending market, the bank still trailed its peers in the middle and smaller business segments.
Following the implementation of the bank's loan process re-engineering program, Pinnacle, MrPratt set a target to at least meet industry growth rates in business lending in the six months to September 30.
Macquarie Securities' data showed that, for total business lending, Westpac reported a three-month growth rate of 7.7 per cent, annualised in January. That compared with a 13.3 per cent average for listed banks.
Mr Pratt said he believed there would be upside from improved productivity in bank branches and as Westpac increased its number of business bankers.
The bank hired 280 commercial bankers and customer managers last year and plans to hire at least another 100 over the next 12 months.
Mr Pratt also said Westpac was now writing about 5 per cent of its new business loans through brokers.
"That's a channel that we need to be in otherwise we're placing ourselves at a disadvantage relative to the other major banks," he said.
The bank has not changed its loan approval thresholds for business bankers since implementing the Pinnacle program in September.
However, Mr Pratt said he was reviewing the bank's position on low-documentation loans, including meeting aggressive competitors such as the Commonwealth Bank of Australia on pricing.
"Our experience over the past 12months has been good in terms of delinquency rates and the like not concerning us," he said.
Low-doc loans require less paperwork and typically allow borrowers to self-verify their income.
Mr Pratt also said the bank was comfortable allowing LVRs of 85per cent, and that other banks were approving similar loans on negotiation with the borrower.
"We are simply going above the line to be public about it but we are doing it with a 30 basis point premium," he said.
"We are very confident that we are not in anyway driving into a risk position that we are uncomfortable with."
Analysts at Macquarie estimated that, in a worst-case scenario, the increase in bad and doubtful debts would only amount to between $7million and $10 million.
