Are the mainstream banks preparing for an assault on commercial lending – traditionally the bastion of the non-bank sector? Mortgage Business asked Sintex’s Cathy Dimarchos for her perspective on Australia’s commercial lending landscape.
According to the latest JP Morgan and Fujitsu Australian Equity Research report, the small to medium enterprise market (SME) is enjoying a period of rude health. This, the report indicates, has extended to increased interest in commercial property investment.
Indeed, commercial properties are currently rewarding investors with solid rental returns throughout Australia – with The Sydney Morning Herald describing offices, shop-fronts and industrial sites as investment hotspots.
While traditionally the domain of non-bank lenders, the strengthening commercial market has caught the eye of the mainstream banks. With competition so tight in residential markets, it would seem commercial lending is prime ground for the banks to launch an assault.
For the time being, however, the non-bank sectors’ hold on the market is secure, according to Cathy Dimarchos from wholesale commercial non-bank lender Sintex. She believes that the non-banks have a strong enough service proposition to fight them off.
Mortgage Business (MB): Have you noticed any significant changes in the commercial market recently?
Cathy Dimarchos (CD): The saturation of the residential market is having an impact on those operating in other areas. We specialise in commercial lending and we’ve certainly noticed an increase in interest from the major banks in our sector – especially over the last six months.
MB: Has this affected your business plans for the future?
CD: We’ve seen a bit of movement from the banks but not felt any direct pressure to change our approach. The banks have deep pockets though – if they decide to explore this market it could cause quite a stir and require a response.
MB: How would the banks increase their market share?
CD: The banks are resource and reputation rich and can compete quite comfortably on products and price. Knowledge and understanding of the industry though will probably let them down in the eyes of customers.
MB: Is there any way the banks could really shake up their approach to the sector?
CD: If the banks were to become more relaxed about credit ratings, or decided to introduce low doc or non-conforming products for commercial borrowers, then there would be some significant outcomes – I really can’t see that happening though.
MB: Will the banks have a lasting impact on this market?
CD: No. Commercial borrowers, like residential borrowers, still require good service, flexible products and on-going advice – which is why they are attracted to non-bank lenders. White label products and industry knowledge will also help the non-bank sector hold onto numbers in the commercial lending space.
MB: Any closing remarks?
CD: At the end of the day the banks are looking to churn through a new sector of the market to produce higher margins – the non-bank sector has a longer-term view based on lower margins, and that’s what’s important to borrowers.
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