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Comyn says CBA has increased its share of business customers who consider CBA their main financial institution and this gives the bank an advantage when trying to lend more money.
During the 2022 financial year, CBA added a record 200,000 new business transaction accounts which added $6 billion in new deposit balances.
Banking’s next battleground
It is logical for Comyn to turn business lending into the next battleground for the big four banks because the rising interest rate cycle will make it harder to grow its mortgage loan book.
CBA is a mortgage powerhouse with 25 per cent market share. Its dominance means the bank’s latest data on home lending will be exhibit 1 in ANZ Banking Group’s case to the competition regulator for approval of its $4.9 billion takeover of Suncorp.
CBA’s result shows why Shayne Elliott is scared of it. CBA added $34 billion in new home loans – compared to $4 billion at Suncorp Bank. The size of Suncorp’s home lending book is $50 billion. CBA’s is $556 billion.
In other words, every 18 months, CBA adds the equivalent in home loan assets as the entire Suncorp mortgage portfolio.
Becoming No. 1 in business banking will not be easy for CBA. Although it does help that Westpac is not as focussed on the issue because its head of business banking, Chris de Bruin, also has to worry about Westpac’s retail banking business.
At CBA, Vacy-Lyle has transformed the business bank’s funding arrangements through successfully growing business deposits.
Business deposits outstrip loans
Comyn says a sign of CBA’s focus on achieving a lower cost of business funding can be seen in a comparison of its mix of business banking assets and liabilities between 2019 and 2022.
“In 2019, the business bank had $38 billion more assets than liabilities – that’s more loans than deposits,” he says. “Now, it’s $3 billion more deposits than loans.
“When we bank customers holistically, and we have the privilege of having their transactional relationship, it gives us more confidence to be able to lend.”
The business bank delivered 6 per cent growth in cash profit to $3 billion in the year to June 30, making it the second-biggest contributor to profit after the retail bank with a cash profit of $4.9 billion.
Comyn admits CBA has some way to go before it can topple NAB as the leading business bank. NAB’s market share in business lending is 20 per cent while CBA’s is 17.7 per cent, according to the latest data from the Australian Prudential Regulation Authority.
‘Stronger in merchants’
“We have a different composition of business: We have more customers, more deposit balances and more customers who consider us as their main financial institution,” Comyn says.
But CBA is increasing market share in most areas and remains dominant in some that NAB will never crack.
NAB is the leading lender to the rural sector, but CBA has lifted its agri lending by 15 per cent in the 12 months to June.
Comyn knows NAB is No. 1, but that is a reason to go harder.
“I agree they’re strong. They have a bigger lending franchise and larger lending balances,” he says. “But we are stronger in merchants with the largest share of merchants and the largest share of payments.”
McEwan and his head of business banking, Andrew Irvine, should be on their toes as Vacy-Lyle steps up his efforts to win more market share.
“We’ve been, over the last few years, clearly trying to focus on building out the business bank and trying to leverage some of the structural advantages that we’ve had in retail to give the balance sheet and a bit more diversification, which I think it’s helpful at this point in the cycle,” Comyn says
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