Banks fighting over medium-sized companies as recovery gathers pace

Banks are fighting hard to win the business of Australia’s best-performing medium-sized companies, with new business banking satisfaction ratings from research firm DBM suggesting Westpac is leading the charge.

DBM’s satisfaction ratings for August show Wesptac and Commonwealth tied for first place in satisfaction ratings, with average ratings of 7.1 out of 10 across the entire banking sector.

However, DBM’s managing director Dhruba Gupta says the medium segment of the market – classified as businesses with turnover between $5 million and $50 million by DBM – are now the prime targets for banks, who are attracted by the strong sense of optimism among these companies.

A separate DBM survey showed hiring intentions and revenue forecasts were highest among mid-sized firms.

“The medium businesses have a pretty optimistic view about the market and it’s the small and medium businesses that are hiring more people,” Gupta says.

“If you are hiring that means you are going to be expanding your businesses, you’re going to be investing and you’re going to be looking for funding.”

DBM says Westpac and CBA lead the medium segment with ratings of 7.3 and 7.2 out of 10, followed by NAB (7.0 out of 10) and ANZ (6.7).

Gupta says Westpac’s heavy investment in the business market in the last 12 months – the centrepiece of which has been a push to put autonomous business banking relationship managers back in branches – is clearly paying off.

“It takes awhile to turn these ships around but Westpac is doing very well in that space.”

Gutpa argues the attraction of the medium segment of the market is natural.

At the big end of the banking sector, the dollar value of deals is large but competition is high and margins are very tight. At the micro end of the market (under $1 million) customer numbers are high, but the cost of servicing these clients is high.

That leaves a sweet spot of established, medium-sized companies which look set to enjoy strong growth in the next few years.

“You’ll go where you think you can make the most money and the SMEs are possibly the best thing to target because that’s where the margins are.”

While the banks are naturally aiming for the best-performing companies, Gupta says medium-sized businesses who have their financial house in order – good records, good business plans, all the right documentation – should not be afraid to shop around.

“The banks are definitely aware that these guys are a big opportunity.”