St George Bank is offering business borrowers up to $50,000 to switch from rival lenders in a bid to lift its presence in the corporate lending market.
St George, a subsidiary of the Westpac Banking Corporation, will pay back as much as 0.5% of the size of a loan to customers who switch their business to the bank, up to a maximum of $50,000.
The offer, valid until July 31, follows on from the latest tactics of other lenders, which have attempted to poach each other’s customers with cash incentives, as competition for borrowers heats up.
A spokesperson for St George says when customers look to switch lenders, cost is one of the major impediments.
“Realistically at that $50,000 level, you are talking about larger corporate customers, but the switching opportunity is available to small and medium enterprises as well,” the spokesperson says.
St George is also attempting to reignite its home loan business by extending the timeframe of interest rate discounts. It is offering a 1% discount on mortgage interest rates to new borrowers for the first year of their loan.
It will also pay $700 to anyone who switches from another lender, extending the offer until the end of April.
St George has a history of targeting business lending towards the commercial property market, which suffered setbacks in the wake of the global financial crisis.
But the bank has retreated from the sector, lending $600 million less for commercial property-related deals in the first quarter of 2011.
The pullback is part of a plan to diversify St George’s business loan portfolio, with the bank looking to lift its presence in areas such as leisure and hospitality, manufacturing and health.
The latest figures from the Reserve Bank of Australia show the volume of lending to corporate Australia fell 0.1% in January and 2.4% over the past 12 months.
The St George spokesperson says competition for customers is intensifying as a result.
“Competition, whether it is in the home loan market, deposits or business lending, is as strong as it has ever been,” he says.
“Post-GFC, we are in a lower credit growth environment. To win business at the moment, you need to really fight harder for it and when there is low credit growth, you have to take customers from competitors.”
The latest DBM Business Financial Services Monitor shows the customers of smaller lenders are more satisfied than those who bank with one of the major four.
DBM managing director Dhruba Gupta says the gap is growing, with regard to customer satisfaction levels among small banks and big banks, partly because the former are seen to be more accessible.
“This suggests that a locally-focused brand – providing it can offer all the same things as a big bank – has an increasingly large role to play [in the lending market],” he says.