(Bloomberg) -- Business banking looks set to be the next battleground in Australia after mortgage lending. Hiring people to support the growth will be a problem, according to the country’s biggest lender in this area.
“You can’t get there quickly,” National Australia Bank Ltd’s Chief Financial Officer Nathan Goonan said in an interview. “It’s not like you can turn around and just hire 600 bankers.”
The hurdle for aspiring players is that unlike mortgages where there are now digital offerings and external brokers who bring in the bulk of new loans, 70% of business loans at a bank like NAB are written by in-house specialists, said Goonan, who studied agricultural science in university and sees it as a good training ground to be a business banker.
The Melbourne-based bank has invested A$1.3 billion ($877 million) into its business banking franchise over the three years since September 2020, that has included more than 600 new roles. NAB’s business lending volume grew 30% over the same period, said Goonan. The firm has around 2,400 business bankers, which includes 650 regional and agribusiness bankers across the country.
For Australia’s biggest banks, business lending has become more profitable than underwriting home loans after years of fierce competition. The situation puts NAB in the hot seat as its reliance on this area may be shaken if a similar tussle for market share erupts. Already, Macquarie Group Ltd. has said it sees a long runway to grow in areas like business banking. The country’s largest lender Commonwealth Bank of Australia is ahead of NAB in the net interest income it earns from its business lending division.
In a signal of the division’s importance, Westpac Banking Corp. elevated its former business and wealth division boss Anthony Miller to be its next chief executive officer. NAB itself picked Andrew Irvine, who ran business and private banking, as its CEO this year.
“We’re very respectful of the competition and we’re seeing them more in the market as they focus there more,” said Goonan, referring to the business banking landscape. “For our part, we’re going to continue to invest in it.” Goonan, a former investment banker at Lazard Inc. and Goldman Sachs Group Inc., became CFO last year after leading the global execution of the bank’s corporate strategy.
Still, there are challenges in this area. NAB said last month that asset quality deteriorated in the third quarter amid further signs of stress building in the nation’s economy.
“NAB’s big exposure to business and institutional banking could expose it to more credit risk than peers heading into 2025, prompting a 15-20% profit drop,” Matt Ingram, a senior industry analyst at Bloomberg Intelligence in an August note. The bank remains reliant on healthy businesses to stave off the drop.
(Adds NAB’s business banking headcount in fourth paragraph.)
©2024 Bloomberg L.P.
