Business looking to borrow in wake of election result: NAB
As a survey pointed to increased business borrowing, National Australia Bank's head of business, Joseph Healy, said discussions with customers in recent weeks suggested companies were "a lot" more confident about expanding.
Mr Healy said it was too early to say if demand for credit had risen since the nation went to the polls on September 7.
But he said there had been a clear lift in confidence as a result of the election of a majority government.
"It's very early days but there's no doubt there has been a turnaround," he said.
A separate survey by East & Partners and Macquarie also found one in four business customers planned to borrow more as a result of the change in government.
Mr Healy said that in the past two to three years many businesses had lacked the confidence to invest because of the uncertain environment, and in the lead-up to the election many people had opted to sit on their hands.
Now, with a majority government in place, he said firms were revisiting expansion plans including merger and acquisition opportunities.
"We see more evidence of a willingness now to dust down those files and start to look again at those acquisition opportunities," Mr Healy said.
"The anecdotal feedback that I'm now hearing - quite strongly actually - from our customers, is that they're feeling a lot more confident about pushing ahead."
NAB is Australia's biggest lender to business, with a market share of just under 24 per cent.
The bank's business survey this month showed a lift in sentiment before the election, and Mr Healy said the improvement had flowed into discussions with customers, leading to a "noticeable shift in sentiment".
Expectations are that non-mining investment will play a critical role driving the economy as the resources boom fades.
But official figures show business credit expanding at an anaemic pace of just 1.3 per cent, despite interest rates falling to their lowest level in more than half a century.
The ratio of debt to assets at the country's biggest 300 companies was at its lowest level in 35 years, Mr Healy said, giving them significant headroom to take on more debt once confidence returned.
"With low interest rates and given the [low] financial leverage ... that capacity in mid to larger companies has never been as strong," he said.
A survey of 1000 business customers by East & Partners and Macquarie said 27 per cent of respondents planned to increase their borrowing over the next year as a result of the election outcome.
Macquarie analyst Mike Wiblin said the borrowing intentions of small and medium enterprises had lifted most after the election, and NAB was best placed to benefit from the trend.
Frequently Asked Questions about this Article…
The article says the election — and the resulting majority government — has lifted business confidence, with companies revisiting expansion plans and merger and acquisition opportunities. Surveys cited found around one in four businesses (27% in a 1,000‑respondent East & Partners/Macquarie survey) planned to increase borrowing as a result of the election outcome.
NAB’s head of business, Joseph Healy, reported a ‘noticeable shift in sentiment’ and said customers were ‘a lot’ more confident and were dusting off acquisition files. He also cautioned it was still early to conclusively say whether demand for credit had already risen since polling on September 7.
The article references a survey by East & Partners and Macquarie (1,000 business customers) showing 27% planned to increase borrowing after the election. It also notes separate survey findings described as ‘one in four’ businesses planning to borrow more, and Macquarie analyst Mike Wiblin said SME borrowing intentions rose most after the vote.
NAB is described as Australia’s biggest lender to business with a market share just under 24%. Given its large position in business lending and the reported lift in customer confidence, the bank is seen in the article as well placed to benefit if corporate borrowing and investment increase.
Official figures quoted in the article show business credit expanding at a slow pace of just 1.3%, despite interest rates being at their lowest level in more than half a century. So, while intentions and sentiment have improved, headline credit growth remained anaemic at the time of the article.
The article notes interest rates have fallen to their lowest in more than 50 years and that the debt‑to‑assets ratio for the country’s largest 300 companies is at its lowest level in 35 years. That combination — low rates and low financial leverage — gives many mid to large companies significant headroom to take on more debt when confidence returns.
As the resources boom fades, the article says expectations are that non‑mining investment will play a critical role in driving the economy. Increased business borrowing for expansion and M&A would support that shift if sentiment translates into action.
Based on the article, investors can watch NAB’s business surveys and customer discussions for shifts in sentiment, repeated survey results (eg. East & Partners/Macquarie) showing rising borrowing intentions, official business credit growth figures (currently about 1.3%), and corporate leverage metrics like the debt‑to‑assets ratio for large companies as signs that sentiment is turning into actual lending and investment.
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