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Banks inundated with SME loan deferral requests

by Annie Kane6 minute read

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Nearly 10 per cent of major banks’ business customers have contacted their bank for loan relief, with NAB receiving a year’s worth of assistance calls in just one week, it has been revealed.

Speaking during the Financial Review Banking & Wealth Summit Crisis on Monday (30 March), CEOs from several major banks outlined how they have been inundated with enquiries from business customers needing financial support or relief as the ongoing COVID-19 pandemic disrupts the economy.

A year of enquiries in one week

NAB CEO Ross McEwan stated that the bank has seen inquiry volumes rise drastically since COVID-19 relief packages were announced. He said: “Last week, we did have huge numbers of enquiries coming in from customers, something like 200,000 enquiries coming across all of our different networks, including our branch online, and also into our call centers.”

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Mr McEwan suggested that it was seeing around 8 per cent of its business customers enquiring at the moment.

“In NAB Assist, which is the area that looks after these enquiries we saw in one week, what we would normally see in an entire year of customers ringing in who are having difficulties already. So, the scale of this is very, very large.”

Mr McEwan said the bank expected the “trend to continue on over the next month as businesses start to slow down or stop altogether and [as] the impact then goes through into the second order: the effect of suppliers and the likes”. 

“We do expect this to continue,” he said.

Mr McEwan revealed that the bank has therefore conducted training and reallocated more staff to operate frontline services, such as contact centres and online enquiries.

He also highlighted that demand for the bank’s new $250,000 business loan for business customers is “starting to come through” from businesses that want to “see themselves through the next three-odd months” – particularly given the option to defer loan repayments for six months.

However, he revealed that while some businesses were applying for loans to survive the next six to eight months, there is also a cohort of businesses who are “being opportunistic about it” and looking to access funds now to acquire businesses or grow. 

Mr McEwan added that NAB would first prioritise existing customers, and particularly those who most need the money to survive, while looking at “whether the business was a successful business up until two weeks ago, and then back it from there on end”.

“Funding over the next six to 12 months is an uncertain feature,” he said. 

“My view is to, first off, look after existing customers and look after those who’ve got very good businesses who need some funding to see themselves through. 

“The second order is the opportunistic people/businesses. You want to be there for them, but I’d look out for the first [cohort] ones first.”

However, he warned: “There will be some businesses that were struggling up to this point in time, that will now just find it very, very difficult. And we’ve got to be very careful how we deal with these.”

Banks are the ‘ICU of the economy’: ANZ CEO

Likewise, the CEO of ANZ, Shayne Elliott, said: “We’ve been deluged with people calling, wanting to get payment deferrals or just asking lots of questions”.

He likened the banks to the “intensive care unit (ICU) of the economy”, stating: “These corporates and households will come through intensive care. And we will have this unfortunate role, at some point, of having to decide who comes out at the end in better shape or not. You’ve heard some of the banks and I say: ‘We can’t save everybody’, and it sounds dreadful. But the reality is, even though we are incredibly resourceful, and we have large balance sheets and capability, we can’t do everything. 

“So, we’re going to have to apply our resources, our balance sheet, our help, to those that really do have sustainable business models and will come through this in better shape.

“[I]f we don’t do that, we are actually failing the community. And so, it’s a big obligation, it’s a big responsibility, but it’s something we will hopefully be much more mindful of as the months pass,” the ANZ CEO stated.

He said the bank was therefore having to “go back to basics” when assessing which customers to lend to.

“Do we think they have a business that will go back to normal?” he said. “Will people go back to the movies? Will people go back to restaurants? Yes, we believe people will travel again, and all those other things. Does this company we’re talking to have a track record of an integrity? Are these people who do what they say they will do? Do they get it? Are they willing to do the right thing? That’s very, very important. And then do they have the financial wherewithal to get there, to survive? Are they not overladen with debt etc etc and have the operational capacity? 

“There’s a structured way of working through those things. I imagine that the vast bulk of our customers meet that criteria. But that’s exactly what we’re going through with our bankers at the moment.”

However, the ANZ CEO warned that the bank is being careful that it doesn’t “end up helping all the people who came in and asked for help first and run out of resources to help the people we should be helping”.

“So, I think people have to bear with us a little bit. We want to do the right thing, and we want to help as many as we can, but we also need to be really conscious about our own position,” Mr Elliott said.

[Related: Banks expand loan relief policies]

Banks inundated with SME loan deferral requests
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Annie Kane

Annie Kane

AUTHOR

Annie Kane is the editor of The Adviser and Mortgage Business.

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