NAB slashes SME loan rates
National Australia Bank has quietly moved to shore up its leading position in small and medium enterprise lending by slashing rates on business loans by up to 116 basis points.In a memo issued to commercial brokers last week the bank unveiled details of the new pricing structure that it has applied to business loans secured by residential and commercial assets of borrowers.For secured loans with a loan-to-value ratio of up to 80 per cent, NAB has lowered rates by 116 basis points to 4.5 per cent.Secured loans with LVRs above 80 per cent have been reduced to five per cent.The offer, which is available through brokers and the bank's business branches, will be marketed until the end of April.The discounts will only apply to loans between A$250,000 and $1 million, and borrowers engaged in certain types of business activity - including commercial property development - are not eligible to take up the offer.Steve Mickenbecker, the group head of financial services at Canstar, described NAB's repricing as "aggressive"."Although NAB has always been strong in lending to small businesses and the middle market, I'd expect this repricing to be only the beginning of intense competition between the banks this year," he said."Lenders have been forced to put the brakes on investment lending in the property market so boosting commercial lending is one obvious strategy for them to replace growth."I would be surprised if we don't see more repricings."Monitoring price trends in the SME lending market is notoriously difficult because advertised reference rates exclude variations in risk margins that lenders apply to borrowers depending on their industry profile, credit records and the condition of their balance sheets.A Canstar survey of twenty business lenders in the middle of last year found that the average variable rate on business loans secured by a residential property was 5.5 per cent. The average for loans secured by a commercial asset was 5.8 per cent.These average rates took into account the additional margins banks imposed for such risks as poor credit records.While NAB typically dominates loans made to SMEs and large corporates in Australia, data published by APRA last week indicates the bank suffered a decline in its share of corporate segment in December.The APRA data shows that NAB's loans and advances to corporate borrowers (excluding financial services companies) fell more than $1.4 billion during the month to $151.27 billion.Westpac appeared to make the biggest market share gains among the major banks in December and throughout most of 2017.The regulator's statistics show that Westpac grew its lending to non-financial corporates by almost $8 billion in the nine months to the end of December to $129.2 billion.If the current trend persists Westpac will likely displace Commonwealth Bank as the country's second largest corporate lender before the end of June.CBA is rapidly losing market share in the corporate segment (excluding financial corporations) after growing its loan book by only $2.1 billion to $131.2 billion in the nine months to the end of December.However, its lacklustre performance was more than matched