CBA targets rivals as chase for business banking crown heats up

CBA’s head of business banking, Mike Vacy-Lyle, says the bank is targeting a bigger slice of the business banking pie despite a slew of businesses, especially in the property and hospitality sector, feeling the pinch.

Vacy-Lyle on Monday said the country’s biggest bank had been growing above the average of its peers in business banking, with more than 170,000 business accounts opened over the past year – up 9 per cent year-on-year.

“We’ve seen an unprecedented increase so far in our number of active business banking accounts,” he said. “We are now opening more than 5000 business transaction accounts a week.”

CBA’s Mike Vacy-Lyle is eyeing Macquarie’s market share in the real estate sector.

CBA’s growth comes despite some businesses, especially property developers, facing “incredibly high” levels of liquidations and insolvencies amid a labour shortage, increasing input costs and fixed-price contracts.

Vacy-Lyle said other sectors have also been feeling the heat.

“Pubs and clubs are doing incredibly well, but small restaurants and coffee shops are absolutely doing it tough.”

While margins in the business banking sector have come under pressure, Vacy-Lyle said CBA’s margins have held steady. “There’s been a lot of competition in the space, but we’ve been able to retain margin while growing ahead of the system.”

However, CBA is eager to turn up the heat on its rivals, leveraging its position as the country’s dominant bank to grow lending to the large customer base of businesses that already rely on some of its other services.

“More than one in four Australian businesses bank with us, just over 18 per cent borrow from us, and we see 40 per cent of all payments in Australia,” Vacy-Lyle said. “We have leading transactional bank deposits. That means we’ve got a lower cost of funds, and it gives us deeper insights into our customers to meet more of their needs.”

While NAB is the big fish in business banking, Vacy-Lyle said CBA is also keen to cut Macquarie down to size by sharpening its focus on the real estate market.

Macquarie owns the industry-leading DEFT Payment Systems, which is commonly used in the real estate sector for rental payments and other property-related transactions.

CBA on Monday announced it would partner with real estate software provider MRI Software, which processes about $2 billion worth of rent a month through its platform.

“Macquarie has had a leading product there for very many years, and that would have to be disrupted, so it gives us access to a deposit base,” he said, noting the $20 billion pool of deposits held by real estate agents on behalf of renters.

“We bank more than one in four real estate businesses in Australia,” Vacy-Lyle said. “If we get payments into all of those, we probably should be able to get that share, and maybe more, of the deposit base out of that market, which we don’t have at the moment because we don’t have the payment capability.”

Vacy-Lyle added that by focusing on businesses that already have a main-bank relationship with CBA, the bank can better protect its margin.

“What you’re able to see is all the flows [of your customers].”

“If I’ve got your transactional deposits, your merchant acquiring, your working capital facility, I have the entire value of that relationship. We’re able to see all the banking opportunities and understand the levers of the customer.”

The Market Recap newsletter is a wrap of the day’s trading. Get it each weekday afternoon.