NAB falls sharply in latest business banking satisfaction survey

Just a day after CBA and Westpac went after NAB’s business banking customers with full-page newspaper advertisements, the latest business banking satisfaction report from DBM Consultants has shown NAB is falling badly behind its rivals, with its satisfaction rating dropping 1.5% in a month.

While the other three big lenders held their ground, out-of-cycle interest rate hikes and major IT problems have been blamed for NAB’s poor performance.

Dhruba Gupta, managing director DBM, says the new bank marketing war over business customers – which has seen Westpac offer to pay up $20,000 of switching costs for loans greater than $100,000 – is a sign that CBA and Westpac are keen to boost their non-mortgage lending.

“Often the traditionally more profitable mortgage market gets crowded, which tightens margins and forces the banks to look elsewhere to boost profits,” he says.

“As NAB have attacked the mortgage market by cutting fees and interest rates, CBA and Westpac are looking for new ways to improve their results. It appears they have both selected the business banking market for this.”

Westpac have been leading the business banking ratings since last July and has a satisfaction rating of 7.1 out of 10 in the current survey. ANZ is second with 7.0, CBA is third with 6.9 and NAB trailing at 6.7.

NAB’s satisfaction has now fallen for three consecutive months.

The DBM survey shows that micro businesses (defined as having less than $1 million in annual revenue) had the biggest decline in overall satisfaction ratings.

Gupta says this is not surprising, as they are often hit harder by interest rate rises for two main reasons.

“Most small businesses are single person operations that also have mortgages, so they get hit twice,” he says.

“Medium- and large-sized businesses are also able to better anticipate rate rises, meaning they have time to plan and budget for potential rises. Small business is often unable to do this, getting the news of a rate rise when it happens.”

Given NAB has the biggest share of the business banking market (with around 22.5%), Gupta says the bank “certainly has the most to lose” from falling satisfaction ratings and increased competition from other majors.

“NAB’s IT problems have been the most significant cause of the ratings slump,” says Gupta, “But I assume have already began the process of fixing those problems.”

Many commentators believe the business banking has been ignored by the banks in recent times, as it’s been seen as less profitable than other markets and carries a higher risk profile for the lenders.

But these new advertisement’s by CBA and Westpac may be a sign of change.

However, the executive director of the Council of Small Business of Australia is slightly more sceptical, telling SmartCompany yesterday it’s like an “orchestrated soap opera”.

“They are spending money on these marketing campaigns, but they don’t make lending any easier or cheaper for small business. I still hear so many stories about small businesses that continually get denied access to funding,” he says.

“I’ll start paying more attention when small business lending conditions improve. These advertising campaigns are a mere distraction.”