Loans tougher for industries seen at risk

Banks pass on a relatively small share of rate cuts to borrowers.

Banks are imposing tougher interest rate conditions on retailers, manufacturers, media companies and miners, as lenders take a cautious view of more vulnerable or risky sectors.

Figures published by Macquarie and research company East and Partners show businesses in mining, retail, manufacturing and telecommunications were much more likely to have their interest rates "re-priced" higher by banks.

Mining companies, many of which are being squeezed by weaker commodity prices and the high dollar, were the most exposed to the trend. About 10 per cent of miners in the survey said their loans had been re-priced - whereby banks pass on a relatively small share of rate cuts to borrowers - compared with an economy-wide average of about 6 per cent.

Companies in manufacturing, retail, and media and telecommunications were also more likely to have their borrowing rates adjusted by lenders.

Macquarie's banking analyst, Mike Wiblin, said the banks were re-pricing rates in sectors seen as higher risk.

"I think they are taking a view on the risk of those sectors, and they are pricing accordingly," Mr Wiblin said.

The findings, based on a survey of more than 30,000 companies, come as business credit growth continues to struggle. But, in a tentative sign business demand for credit could be recovering, the survey said borrowing intentions were at their highest level since the global financial crisis.

While many small businesses complained of prohibitively high interest rates during the crisis, Mr Wiblin said, the overall level of loan re-pricing had fallen from previous peaks.

"It's a lot lower than it has been in the past, but having said that, the guys that are being re-priced are those in industries with weaker outlooks," he said.

Bankers have privately said they are cautious about lending to some companies in sectors battling structural change and the high Australian dollar, such as retail and manufacturing.

Figures from the Reserve Bank show the value of outstanding loans to manufacturing businesses has dropped by a quarter in the past four years, while lending to construction companies is down 17 per cent.

At the other end of the spectrum, credit has grown strongly in mining and the utilities and financial sectors have endured much less re-pricing than average.

Brokers say any bounce-back in business credit is likely to benefit NAB, the biggest lender to small and medium businesses, and ANZ Bank, the biggest in institutional lending.

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