Why the banks are missing a big SME opportunity
Last week at a LeadingCompany roundtable I was surprised and shocked at the attitude towards banks by some of the owners of Australia's largest private companies.
Apart from HSBC, which got a huge rap from one of the entrepreneurs, there wasn't a nice word to be said.
And yet these companies with about $400 million revenue and thousands of staff would have been a banker's wet dream in the 1990s.
Yeah, we all know the world has changed. But there is a major opportunity going begging – and that is to take the business bank mantle.
NAB had the mantle through the 1980s and ‘90s. It was the undisputed bank of business with a huge list of private companies that were very loyal to the bank and viewed the bank as a trusted business partner.
The fact that NAB stayed with many of them through the early 1990s recession built up a huge reserve of good will within the entrepreneurial community. Businesses loved NAB back then and told other entrepreneurs what a great bank it was.
Then in the first decade of this century NAB began to lose its gloss. All four big banks and the minor banks wanted to play in this space. It was good business through a boom time. And if you got a business early on as it was growing, no busy entrepreneur was going to bother shifting banks even if they complained bitterly about the service.
Huge marketing budgets were spent as each bank vied to be the business bank. In my view they all succeeded in raising awareness that they played in the business space but none grabbed the mantle.
Then the GFC hit and banks began to bunker down, focused on reducing the costs of capital. They began to see their bad debts rise. By 2010 business banking was on the nose. Talk to entrepreneurs who were dumped through this period just when they needed their bank the most and see the fury.
So here we are today. On one side of the dance floor we have the jilted entrepreneurs quietly – or loudly – fuming. On the other, the banks shuffling around like 15-year-old boys on a first date.
They are in the hands of the risk controllers, laying off staff, looking for technological supremacy while studying their brand surveys with misery, noting that they are slipping backwards in the mindset of the business community but unable to act and create a clear strategy for growth.
Well, they are missing the opportunity right under their noses.
And it is this: to grab the mantle for the next ten years as Australia's leading business bank. It's not hard. You find the channels to market and tell these companies that if they have a growing business, come and talk. That will do for starters. But you have to be patient as the cycle time to make a decision on banking can be as long as two years.
The great news for the banks is that these companies are as well run as my mother's kitchen (she is a home economist, not a journalist). Take, as an example, these companies at our LeadingCompany lunch. They are in great shape. They have been through six years of tough conditions and are battle hardened, hungry for even faster growth and hampered by lack of funds. But they are going to need a bit of romancing before you get to jig.
So who will it be? NAB has had a steady-as-she-goes strategy throughout this post-GFC period, which has been reasonably successful. Does it want the mantle back? ANZ has stayed active in the start-up company marketplace which will do them good. But will the bank branch out, using its strong Asian presence to push business banking in the Asian century?
Westpac has a range of portfolio brands that need help. Those brands could appeal to different parts of the business market. But does the bank have the will to make the investment needed to grab the prize?
What about the Commonwealth? It is seen as having the technological edge in the business banking space but does anyone really know about it? Could they be the next business banking champion?
Yesterday we started a new column, Recovery Watch, not because we are stupid enough to call the recovery, but because we are concerned that the avalanche of bad news that comes in this part of the business cycle, will swamp the green shoots. If you miss the green shoots, you miss the start of the recovery. Ask a stock punter what that feels like!
Bankers need to be just as nervous.