SMEs question banking relationships after sharemarket volatility: Report

Business customer satisfaction dropped slightly last month as concern over the local and global economic outlook caused customers to question their banking relationships, and Westpac and Commonwealth Bank are expected to have more satisfied customers if the tumult continues.

DBM’s Business Financial Services Monitor, a monthly survey of decision-makers from micro businesses, small- and medium-sized enterprises and corporate and institutional businesses, has found that average business customer satisfaction fell from a record high across all businesses. Westpac was the most popular big bank for the 7,469 businesses surveyed.

The monthly fall, from 7.2 in July to 7.1 out of a potential high-score of 10, was the biggest monthly decrease since the big banks lifted rates by more than the Reserve Bank’s 25-basis-point increase at the end of last year, the consultancy says.

According to DBM managing director Dhruba Gupta, the uncertainty in Europe and the US likely led to the fall in satisfaction.

“It may not be anything that the banks had done; it’s perceptions of what could happen,” Gupta says.

“Last time, things tightened up a lot with the banks during the GFC, so there might be fears of what the banks would do if the situation worsened. The uncertainty I suspect is an issue.”

With a score of 10 meaning “extremely satisfied”, Westpac scored an overall rating of 7.3, followed by Commonwealth Bank of Australia at 7.2, ANZ Banking Group at 7.0 and National Australia Bank at 6.9.

Among the 3,823 micro businesses surveyed (those with less than $1 million in annual turnover who account for 88.7% of businesses surveyed), the most popular bank was Westpac. Westpac, whose St George division has traditionally focused on SMEs, had a rating of 7.3, followed by CommBank of Australia at 7.2, ANZ at 7 and NAB at 6.9.

For the 1,641 small businesses surveyed (those with turnover of between $1 million and $5 million, accounting for 8.7% of businesses), Westpac was again the favourite, at 7.5. This was followed by CommBank at 7.4, NAB at 7.2, and ANZ last at 7.1.

For medium-sized businesses (between $5 million and $50 million), Westpac was not the most popular. CommBank and NAB scored that honour, at 7.5 and 7.4 respectively. Westpac and ANZ were both third at 7.0 and 7.1.

For large businesses, those with $50 million and above and accounting for 0.3% of businesses, NAB and CommBank were the most popular at 7.4 and 7.5 respectively, while ANZ was next at 7.1 and Westpac was last at 7.0.

Gupta adds that if you are a business that is pessimistic in outlook, you are going to rate Westpac and Commonwealth much higher than you would rate NAB or ANZ.

“We believe it might be to do with how banks deal with businesses that look like they don’t have a great future,” Gupta explains.

“It’s possible that NAB and ANZ don’t do as well in convincing them that they are with them, compared with Westpac and the Commonwealth.”

In contrast, Gupta says healthy businesses regard the four major banks as similar.

“What that suggests to us is that if the business is doing gangbusters, all the banks are equally keen to do business with them. At the other end of the spectrum, there’s a bigger differentiation.”

“And our speculation is that as things get more and more uncertain, the number of businesses looking like they’re not doing so well will grow, so the difference between the Sydney and Melbourne banks will grow.

“In a market where the distinctions between the big four banks aren’t great, over time if this uncertainty prevails and the way that Commonwealth Bank and Westpac are treating their customers seems to be difference, we would expect to see that the difference will become more marked.”