Few lenders take a chance on business borrowers

Amid the optimism over the outlook for bank profits and perhaps the valuation of bank stocks - for which last Friday's minor profit upgrade by Commonwealth Bank is the recent driver - there's not much clarity over the long-term drivers of improvement beyond milking fatter margins from an ever more captive mass consumer market.

Tackling a different segment of the market - business banking, and specifically business lending - the asset base continues to shrink for the industry as a whole and for major banks in particular.

The RBA financial aggregate for business lending is down by eight per cent over 12 months, with the RBA estimate of lending to business by all lenders at $709 billion. Over six months this aggregate is down by four per cent, with the pace of decline quickening over recent months rather than slowing down.

The declines in business lending are a little more pronounced at major banks.

Business lending by Commonwealth Bank is down six per cent over the six months to November 2009, while Westpac's is down nine per cent over six months.

The metric is less severe at National Australia Bank (Australian banking's biggest business lender) at a decline of 1.5 per cent; the decline is marginally higher at ANZ.

There are lenders reporting growth in business lending.

Macquarie is the most noteworthy, with growth of 54 per cent to $5.4 billion over six months to November 2009 (a period chosen to roughly coincide with the fiscal stimulus beginning to kick in and the wariness in consumer and business confidence beginning to reverse).

Rabo, a specialist agribusiness lender, reported growth in business loans of 3.5 per cent to $10.3 billion over six months.

Bendigo and Adelaide Bank (whose rhetoric suggests they are taking a cautious approach) reported growth of two per cent to $7.5 billion.

Bank of Queensland, with much more ambitious rhetoric to match through performance, reported growth in business lending of five per cent to $4.9 billion.

The handful of other banks reporting growth in business lending included Bank of China (which doubled over six months to $1.7 billion); Deutsche Bank and Laiki Bank.

That leaves another 49 registered banks monitored by APRA reporting declines in business lending over the selected period of six months, and there were scant signs of this trend softening in the later months of 2009.