Westpac wants to overtake NAB as top SME lender

WESTPAC has outlined a plan to overtake National Australia Bank as the nation's biggest lender to the $60billion small and medium-sized business segment.

WESTPAC has outlined a plan to overtake National Australia Bank as the nation's biggest lender to the $60billion small and medium-sized business segment.

Retail and business banking boss Peter Hanlon said yesterday that, unlike recent announcements by Commonwealth Bank and ANZ, Westpac's ambitions in the politically sensitive SME segment were "uncapped".

"Do we want to become No1? In a word, yes," Mr Hanlon said. "It's the reason we exist."

NAB, which will unveil its group strategy under new chief executive Cameron Clyne tomorrow, has traditionally been dominant in SME lending, with about 20 per cent of the market.

However, Westpac, with St George Bank under its wing, is now a close second, with a 19 per cent share. At a trading update last month, Mr Clyne said NAB was gaining market share in business lending, ranging from small businesses to large corporations, by growing the overall loan book at 1.3 times the overall banking system.

Mr Hanlon said Westpac's loans to SMEs with annual turnover of up to $10 million was expanding at a similar rate, fuelled by an unmet demand from the withdrawal of second-tier lenders and foreign banks. "It's a big hole in the market of 20-30 per cent, which used to be filled by smaller players making money out of thinner margins and looser credit criteria," he said.

"Part of that 30 per cent will be open for us, and we've had a flood of inquiries.

"But the conversion rate from those opportunities is lower, because the quality of the credit is not as good, although a lot of companies will go away, make some changes and come back."

Small Business Minister Craig Emerson convened a summit last Friday, involving banks and small business organisations, to thrash out allegations that banks were rationing and over-pricing credit.

Mr Hanlon, who attended the summit, said the solution to the funding gap in the SME segment was not immediately apparent.

The parties, he said, had agreed to meet again in the near future.

Westpac, in the meantime, had set no internal limit on its SME lending, after extending $15 billion to the segment in the 2008 calender year.

This compared to recent commitments by CBA and ANZ to lend the same amount as they did last year -- $12 billion and $8billion respectively.

The SME segment was hotly contested because it tended to recover more quickly than large corporations from a recession, Mr Hanlon said.

"The companies tend to be more nimble, and the people running them are more entrepreneurial," he said.

"It's definitely a big opportunity at the moment, one of Westpac's top three priorities, because at some point the economy will turn and start picking up."

Late last year, Westpac announced plans to hire a further 300 business bankers, and add more business banking centres.

NAB is adding 175 business lenders.