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The big four banks have regained market share in the business and commercial lending space amid an overall slide in settlement volumes, according to the latest research from aggregator FAST.
Aggregator FAST has published its latest Business Lending Index, which assess trends in the business, commercial, and asset finance lending space by collecting data from 24 lenders.
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According to the index, the major banks increased their share of the market to 65 per cent in the December quarter of the 2020 financial year (FY20), up from 60 per cent in the three months to December 2018 (FY19).
This follows a sharp contraction in the big banks’ share of the market in the prior comparative period, from 76 per cent in the December quarter of FY18.
Accordingly, non-major market share (includes non-banks) fell from 40 per cent to 35 per cent, after increasing from 24 per cent in the December quarter of FY18.
The resurgence of the big four also encroached on non-bank territory, with non-bank share slipping from 14 per cent to 11 per cent, after rising from 5 per cent in the December quarter of FY18.
Commenting on the competitive shift in the business, commercial, and asset finance space, FAST CEO Brendan Wright said the result was reflective of a concerted push from major lenders to recover lost ground in the space.
“In our last report we cautioned that the large lenders wouldn’t sit on their hands,” he said.
“This has proven to be correct and the major banks are now firmly back in the game with sharp pricing and conditions, particularly for commercial property loans.”
However, Mr Wright claimed that competition in the sector “remains strong”, noting the pro-competitive contribution of experienced brokers in helping clients navigate through complexities that “characterise the market”.
Volumes slip across channels
FAST’s index also revealed that settlement volumes declined across all supply channels, including among the major banks, which improved their market share.
The major banks settled approximately $817 million in business, commercial, and asset finance loans over the December quarter of FY20, down 2.6 per cent from $838.8 million in the previous corresponding period.
Non-major lenders recorded a sharper contraction in the value of settlements, down 20.5 per cent, from $549.2 million to $436.7 million, while non-bank settlements slipped 24.5 per cent from $189.9 million to $143.2 million.
In total, settlement volumes slipped 9.4 per cent to $1.25 billion in the December quarter of FY20.
On a state-by-state basis, Western Australia was the only state to record an increase in the value of settlements, up 3 per cent to $139.1 million. As a result, Western Australia grew its overall share of the market from 10 per cent to 11 per cent.
“Confidence has started to pick up in [Western Australia], which is a very positive sign for businesses in the region and the brokers who support them,” Mr Wright said.
“The housing market remains slow to recover, however, and it is too early to tell when we’ll see more positive signs of a sustained recovery in the [Western Australia] residential property market.”
Meanwhile, NSW continues to boast the largest share of the market (36 per cent) despite reporting a decline in settlement volumes, followed by Queensland (28.5 per cent), Victoria (27 per cent), and South Australia (6 per cent).
Mr Wright attributed the overall contraction in settlement volumes to a softening in business conditions amid the bushfire crisis and the coronavirus outbreak.
“We anticipate that this slowdown will continue as the impact of the bushfires and coronavirus [weighs] on sentiment,” he said.
The FAST CEO also noted that a shift in focus among brokers towards residential mortgage lending in response to the pick-up in housing market activity may also have contributed to the slowdown in business, commercial, and asset finance volumes.
“The pickup in the housing market is welcome news for mortgage and finance brokers,” he said.
“Macro-economic swings and changes in the economic environment can quickly become opportunities to brokers that have diversified their businesses.”
Mr Wright concluded by noting that he expects weakening economic conditions to place further downward pressure on business, commercial, and asset finance volumes over the coming quarter.
“The catastrophic bushfires that started back in October have impacted the lives of thousands of Australians, including their businesses. The scale of destruction these bushfires have caused is tragic,” he said.
“Coupled with the growing concern from the coronavirus, the economy is facing some significant challenges.
“The economic impact of these challenges is only now being quantified and we expect to see that reflected in the next quarterly data to come out of the FAST Business Lending Index.”
