New Zealand’s largest bank is lending less cash to businesses than it was half a decade ago.
Figures from the Reserve Bank show a softening across all bank business lending since the pandemic, with ANZ the only one going backwards.
The overall growth rate across all banks has slowed to just 1.5%, down from 6% in 2013.
ANZ CEO Antonia Watson told Mike Hosking much of the drop is caused by a decrease in lending to commercial property.
She says their decision was to support their existing customers through rising interest rates and tougher circumstances as opposed to taking on new customers.
However, she confirmed the bank is back to taking on new customers.
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Episode Transcript
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Speaker 1 (00:00):
Let's pick up where we left off last week on
small business lending. Figure show is softening across all bank
business lending A and Z our biggest bank of course,
actually going backwards on that. Over All the growth rates
dropped from six percent in twenty thirteen. This is for everyone,
not just ANZ six percent in twenty thirteen to one
and a half percent. So what's going on here? Antony
Watson is the CEO of A n Z and is
(00:21):
with us.
Speaker 2 (00:21):
Good morning, Good morning, Mike.
Speaker 1 (00:23):
Is there a thing or not?
Speaker 2 (00:26):
Well, there's a thing which I can explain. But the
thing I'm delighted to be able to tell you is
that we are growing and have been growing lending to
small and medium businesses, and that's been despite there's been
a lot more non bank lender activity. I can explain
why the reduction if you want me to it. Selling
you DC was the first thing that we did in
twenty twenty, and then the big impact really has been
(00:49):
a drop and lending to commercial property now there are
several reasons for that. You've got developments that would sort
of been done as interest rates were lower, that then
completed and then got paid off. Period of time you
had interest rate interest rates increasing, time's got tougher, so
not so much new demand. And our decision so that
this was our decision was to support our existing customers
(01:11):
as interest rates are increasing and things are getting tougher,
rather than taking on new customers. So the big drop
in our lending has been from property as opposed to
smaller medium businesses.
Speaker 1 (01:21):
Okay, are you taking on new customers now?
Speaker 2 (01:24):
Absolutely. We've had seven thousand customers sign up in the
first half to our how to campaign, and that's a
campaign about helping you know, you've got this this thing
about you've got to get through the first two years
when you're a new business. We've got that's helping them
get through that first two years.
Speaker 1 (01:37):
Okay. And now those people new clients or people who
had borrowing elsewhere and came to you just in a
competition type way, it would be a.
Speaker 2 (01:45):
Mix, and it will be new startups and reasonably new businesses.
That was part of the part of the requirements for
the package.
Speaker 1 (01:53):
Okay. Part of the explanation last week seemed to be
that there are rules that you guys have to carry
extra capital to back up business lending. Is that true
and if it is true, how much of it is
it and is it a burden?
Speaker 2 (02:08):
So yes, it's true. Exactly how much it is I
couldn't tell you off the top of my head because
it's once you get into business leaning, it's very risk
based and it depends on the individual business. But it
is risky a lending to businesses than lending to householders
who have a home and good equity in their home
to back up the lending. So that's the reason we
hold more capital. It isn't a constraint. We're not constrained
(02:29):
with our capital. We don't sit there and think we'd
rather do lending to housing and to businesses. We're open
to both. We're interested in leanding to anyone who's got
a good plan that shows that they can pay us
back over time.
Speaker 1 (02:40):
Right, I'll come back to the planned thing in a moment.
Would you be generally thinking that this view that you
hold is the view of all the major banks in
the country in terms of lending to business overall, I.
Speaker 2 (02:52):
Would suspect so, yes, But you do have to look
through the numbers. You know, the Reserve Bank numbers that
they publish are reasony bok. Because they're at a noble business. There. Well,
another thing that you know, we see in our portfolios
are lending to very large institutions. I think we've been
out had about seven billion dollars out since the time
I joined the bank sixteen years ago. Because as soon
(03:12):
as your lending gets to say one hundred and two
hundred million dollars, you want to syndicate that amongst a
lot of banks so that you're still breading the risk,
and often you'll get them to borrow their own money
in the debt capital market. Good.
Speaker 1 (03:23):
I'm glad to hear this explanation because what I couldn't
work out in the numbers is that there seems to
be and in fact, I know there's a record number
of business sales in this country. There's never been more
interested in buying businesses, and I'm assuming some of those
people at least need to borrow from banks and therefore
are borrowing to buy businesses.
Speaker 2 (03:40):
Yes, but I think the thing to remember there is
the difference between equity and debt funding. So the first
thing you need is you need some cattle behind you,
because the minute you take on a debt, you're having
to pay interest on that. So you know, we see
businesses that are undercapitalize. It and it's important that you
also have their equity behind you when you start a
business as well.
Speaker 1 (03:58):
Okay, one of the credits we got when we raised
this last week was raised last week was that there's
no one in the bank. And this is not necessarily
you specifically, but it's banks generally that aren't business specialists.
In other words, you do it all by a computer.
You tap in a few numbers and some answer comes back,
and you've got it all you haven't got Is that
true or not?
Speaker 2 (04:17):
We have? Oh, I can't give you the number of
the top of my head, but we have many business
specialists who are sitting ready to help our customers. And
I say, feel like they're not getting to help. They
need get them to email me.
Speaker 1 (04:26):
Right, So there are people right broadly speak at mortgage rates.
Where are we heading? What do you think for July
and August? On the Reserve Bank? Go on, give us
the big big economic read here, Antonia.
Speaker 2 (04:36):
I don't know. I know that Sharon zoln is saying
that they're probably might be seeing some more decreases. The
problem is you've got this uncertainty and got it in
speaking about business. Uncertainty is the worse thing for business
I mean, could the current situation in the Middleast increase
oil prices and have a knock on effect and suddenly
we've got inflation again and the Reserve Bank can't lower rates,
or could it lead to a recession and therefore they
(04:58):
do lower rates to simulate the economy. I just you
haven't seen the situation with as much uncertainty.
Speaker 1 (05:03):
I think maybe would you at a drink after work
when they go well what's new Zealand feel like, what's
your answer? What's the word you were using?
Speaker 2 (05:12):
My answer is sort of green shoots, but uncertainty. So
I think the situation we're in now is that whilst
we can see some improvement, you can see milk prices
and agree and interest rates coming down, so people have
got more money in their pockets. I think we've just
not quite got the confidence because of that uncertainty to
(05:35):
spend it on going out to dinner or spend it
on investing something in your business.
Speaker 1 (05:38):
Yeah, good, andsight. I appreciate time as always, Antonia Watson.
Hopefully that answered at least most of our questions.
Speaker 2 (05:44):
For more from the Mic Asking Breakfast listen live to
news talks. It'd be from six am weekdays or follow
the podcast on iHeartRadio
Let's pick up where we left off last week on
small business lending. Figure show is softening across all bank
business lending A and Z our biggest bank of course,
actually going backwards on that. Over All the growth rates
dropped from six percent in twenty thirteen. This is for everyone,
not just ANZ six percent in twenty thirteen to one
and a half percent. So what's going on here? Antony
Watson is the CEO of A n Z and is
(00:21):
with us.
Speaker 2 (00:21):
Good morning, Good morning, Mike.
Speaker 1 (00:23):
Is there a thing or not?
Speaker 2 (00:26):
Well, there's a thing which I can explain. But the
thing I'm delighted to be able to tell you is
that we are growing and have been growing lending to
small and medium businesses, and that's been despite there's been
a lot more non bank lender activity. I can explain
why the reduction if you want me to it. Selling
you DC was the first thing that we did in
twenty twenty, and then the big impact really has been
(00:49):
a drop and lending to commercial property now there are
several reasons for that. You've got developments that would sort
of been done as interest rates were lower, that then
completed and then got paid off. Period of time you
had interest rate interest rates increasing, time's got tougher, so
not so much new demand. And our decision so that
this was our decision was to support our existing customers
(01:11):
as interest rates are increasing and things are getting tougher,
rather than taking on new customers. So the big drop
in our lending has been from property as opposed to
smaller medium businesses.
Speaker 1 (01:21):
Okay, are you taking on new customers now?
Speaker 2 (01:24):
Absolutely. We've had seven thousand customers sign up in the
first half to our how to campaign, and that's a
campaign about helping you know, you've got this this thing
about you've got to get through the first two years
when you're a new business. We've got that's helping them
get through that first two years.
Speaker 1 (01:37):
Okay. And now those people new clients or people who
had borrowing elsewhere and came to you just in a
competition type way, it would be a.
Speaker 2 (01:45):
Mix, and it will be new startups and reasonably new businesses.
That was part of the part of the requirements for
the package.
Speaker 1 (01:53):
Okay. Part of the explanation last week seemed to be
that there are rules that you guys have to carry
extra capital to back up business lending. Is that true
and if it is true, how much of it is
it and is it a burden?
Speaker 2 (02:08):
So yes, it's true. Exactly how much it is I
couldn't tell you off the top of my head because
it's once you get into business leaning, it's very risk
based and it depends on the individual business. But it
is risky a lending to businesses than lending to householders
who have a home and good equity in their home
to back up the lending. So that's the reason we
hold more capital. It isn't a constraint. We're not constrained
(02:29):
with our capital. We don't sit there and think we'd
rather do lending to housing and to businesses. We're open
to both. We're interested in leanding to anyone who's got
a good plan that shows that they can pay us
back over time.
Speaker 1 (02:40):
Right, I'll come back to the planned thing in a moment.
Would you be generally thinking that this view that you
hold is the view of all the major banks in
the country in terms of lending to business overall, I.
Speaker 2 (02:52):
Would suspect so, yes, But you do have to look
through the numbers. You know, the Reserve Bank numbers that
they publish are reasony bok. Because they're at a noble business. There. Well,
another thing that you know, we see in our portfolios
are lending to very large institutions. I think we've been
out had about seven billion dollars out since the time
I joined the bank sixteen years ago. Because as soon
(03:12):
as your lending gets to say one hundred and two
hundred million dollars, you want to syndicate that amongst a
lot of banks so that you're still breading the risk,
and often you'll get them to borrow their own money
in the debt capital market. Good.
Speaker 1 (03:23):
I'm glad to hear this explanation because what I couldn't
work out in the numbers is that there seems to
be and in fact, I know there's a record number
of business sales in this country. There's never been more
interested in buying businesses, and I'm assuming some of those
people at least need to borrow from banks and therefore
are borrowing to buy businesses.
Speaker 2 (03:40):
Yes, but I think the thing to remember there is
the difference between equity and debt funding. So the first
thing you need is you need some cattle behind you,
because the minute you take on a debt, you're having
to pay interest on that. So you know, we see
businesses that are undercapitalize. It and it's important that you
also have their equity behind you when you start a
business as well.
Speaker 1 (03:58):
Okay, one of the credits we got when we raised
this last week was raised last week was that there's
no one in the bank. And this is not necessarily
you specifically, but it's banks generally that aren't business specialists.
In other words, you do it all by a computer.
You tap in a few numbers and some answer comes back,
and you've got it all you haven't got Is that
true or not?
Speaker 2 (04:17):
We have? Oh, I can't give you the number of
the top of my head, but we have many business
specialists who are sitting ready to help our customers. And
I say, feel like they're not getting to help. They
need get them to email me.
Speaker 1 (04:26):
Right, So there are people right broadly speak at mortgage rates.
Where are we heading? What do you think for July
and August? On the Reserve Bank? Go on, give us
the big big economic read here, Antonia.
Speaker 2 (04:36):
I don't know. I know that Sharon zoln is saying
that they're probably might be seeing some more decreases. The
problem is you've got this uncertainty and got it in
speaking about business. Uncertainty is the worse thing for business
I mean, could the current situation in the Middleast increase
oil prices and have a knock on effect and suddenly
we've got inflation again and the Reserve Bank can't lower rates,
or could it lead to a recession and therefore they
(04:58):
do lower rates to simulate the economy. I just you
haven't seen the situation with as much uncertainty.
Speaker 1 (05:03):
I think maybe would you at a drink after work
when they go well what's new Zealand feel like, what's
your answer? What's the word you were using?
Speaker 2 (05:12):
My answer is sort of green shoots, but uncertainty. So
I think the situation we're in now is that whilst
we can see some improvement, you can see milk prices
and agree and interest rates coming down, so people have
got more money in their pockets. I think we've just
not quite got the confidence because of that uncertainty to
(05:35):
spend it on going out to dinner or spend it
on investing something in your business.
Speaker 1 (05:38):
Yeah, good, andsight. I appreciate time as always, Antonia Watson.
Hopefully that answered at least most of our questions.
Speaker 2 (05:44):
For more from the Mic Asking Breakfast listen live to
news talks. It'd be from six am weekdays or follow
the podcast on iHeartRadio
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