Australia set for strong summer trading period: NAB’s Andrew Irvine

The nation’s top business banker Andrew Irvine says Australia is set up for a strong summer trading period, as business backs the end of lockdowns.

National Australia Bank’s Andrew Irvine expects strong trading over the summer following the end of lockdowns. Picture: John Gass/NCA NewsWire

The nation’s biggest business bank is booming, with a pipeline of activity double the level of a year ago despite the emergence of a three-speed economy from east-coast lockdowns.

Andrew Irvine, the head of National Australia Bank’s business and private bank, says strong momentum in the September half-year had accelerated, with some “ripping” merchant data setting things up for a strong summer trading season.

“When I look at pipeline numbers, they’re about double what they were this time last year, and they’re not wishful numbers; they’re bank-approved transactions which customers can then accept,” he said.

“The numbers we’re putting on the board are the best since our records began. It’s incredibly strong.”

The rosy outlook was despite the widespread pain inflicted by lockdowns.

While an estimated 40 per cent of the economy had “never had it so good”, a further 40-50 per cent went into hibernation and was now gearing up to resume business, with the remaining segment populated by a tail of customers who were still “doing it really tough”.

NAB’s upbeat assessment is supported by the first full week of retail trading data since Victoria reopened.

From October 30 to November 6, the state shelled out more than $2bn, outspending NSW in the first week of its reopening by $50m on restaurant meals and $70m on retail.

The divergence was attributed to additional pent-up demand in Victoria from longer and stricter restrictions.

NAB’s business and private banking unit lifted cash earnings by 0.3 per cent to $2.5bn in 2021, as growth accelerated to $1.3bn, up almost four per cent, in the second-half compared to the six months to March.

Loans to NAB’s heartland of small-to-medium sized businesses rose $6.7bn, or 1.4 times the banking system, in the second-half, as the net interest margin firmed by 2 basis points to 2.85 per cent in a highly competitive market.

Market share in SME lending skipped up 20 basis points to 26.43 per cent.

With this week’s NAB Business survey showing confidence at plus-21 points – within reach of the April record of plus-22.9 points – Mr Irvine said business owners were feeling more confident that the national Covid-19 recovery plan was “concrete”.

“That’s really providing them with the confidence and certainty they need to make investment decisions,” he said.

“They’re buying stock, there’s pretty significant merger and acquisitions activity, and property prices are strong.

“They’re really optimistic.”

At a media lunch in Melbourne on Wednesday, Mr Irvine and chief executive Ross McEwan popped into an adjoining room to speak to a group of about 20 customers.

They reported that the vibe was also upbeat, despite a couple of major challenges – difficulty in finding and retaining skilled workers, which in some cases was leading to wage inflation, and significant disruption to supply chains.

Mr Irvine said one customer in the construction and materials distribution industry was waiting for eight containers of stock to arrive in Melbourne, but the ship was stuck in Singapore with no way out.

“He’s been in this line of business for 30 years and it’s never happened to him before,” he said.

The business bank, which contributed 38 per cent of NAB’s cash earnings, has been a key focus for investment.

It added more than 500 business bankers in 2021, with more to come in the current financial year, introduced greater performance discipline, and automated and digitised processes to improve the customer experience.

Loan processing times have been cut in half compared to a year ago.

NAB on Thursday relaunched its QuickBiz lending platform, with existing customers able to access $250,000 within 20 minutes of a single internet banking request.

Mr Irvine said it was a unique proposition in Australia.

While fintech companies could match NAB in the time taken to approve a loan, they were unable to fund it as quickly.

“This is a big one for Australia because we’ve heard access to funding is problematic,” he said.

“We know a large part of funding in Australia has tended to be asset-backed and in particular property-backed, but this is bringing a more cashflow-based approach to lending decisions.

“And we can do that because of the significant progress we’ve had in data and analytics we’ve had over the last year.”

QuickBiz’s current volumes were “modest”, he said, but NAB’s plans for the platform were “anything but modest”.

Over time, it would open up to new customers, loan limits would be increased, and a secured lending option would be added.

As to the hot competition from Commonwealth Bank in the SME sector, Mr Irvine was unconcerned.

“We respect our competitors and in many ways some of them are making us better because they’re forcing us to improve our capabilities,” he said.

“But I’m not really interested in what others are doing; I’m interested in what we’re doing and we’re pretty happy with where we’re at.”