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Is the boost to business confidence one you can bank on?

The tide on business confidence has been turning in recent months with sentiment improving as the broader economy stabilises. And with that buoyancy comes chatter about interest rate hikes rather than cuts. So what does this all mean for small businesses? One man in touch with this sector is Symon Brewis-Weston, executive general manager of local business banking at the Commonwealth Bank – Peter Switzer caught up with him on his SWITZER program on Sky News Business Channel to find out what’s really happening on the frontline of the small business community.

What downturn?

Brewis-Weston says Commonwealth Bank small business customers are weathering the downturn very well – and are, as a whole, relatively unscathed.

“In many parts of Australia, customers are still asking, ‘where is the downturn?’ I think the downturn’s been patchy,” says Brewis-Weston. “Overall, the portfolio of Commonwealth Bank customers is doing extremely well.”

Switzer has long been on the optimist bandwagon alongside other industry experts, Commsec’s Craig James included. Switzer says the company he kept in the glass-half-full camp reassured him he was on the right side of the fence. Brewis-Weston agrees that the close proximity of James and the likes to the residential mortgage customers and the banking customers was a sign of safety.

“There’s a number of things we look at across our portfolio and there’s some leading and lagging indicators,” he says.

For example, Brewis-Weston points to fewer than expected credit downgrades among their clients as one of these indicators.

“Which means either their sales are holding up or their margins are holding up and their businesses are holding up.”

He also says that overdraft utilisation has remained fairly static for the last 12 months, rather than the upwards creep you may expect when times are tight. The reasons for this, he says, are many – among them the departure from the rate rises and high fuel costs of last October, lower-than-anticipated unemployment rates and the recent stimulus packages.

“On a number of fronts, small businesses have seen relief,” says Brewis-Weston.

He says the stimulus has been well received on the small business front – particularly with the rebate on work vehicles.

“It’s been a fantastic thing,” says Brewis-Weston. “Certainly, we’ve seen a lot of action, particularly leading up to 30 June in the asset finance space.”

And he expects this trend to continue as the supply struggles to keep up with the demand. This response, he says, is a clear sign that businesses are confident about the future.

“If you’re not confident about the future, notwithstanding a tax break, you’re probably going to be a little bit unlikely to invest.”

Customer service

Before his current tenure, Brewis-Weston headed up the Commonwealth Bank’s Indonesia operations. Here, he was astounded by the power of the branch manager – especially when compared to Australia’s then financial service model, the ‘close the branch’ mentality.

“The real key to it was having fantastic front line staff and very good branch managers,” he says. In Indonesia, Brewis-Weston grew the business from two branches to over 50. “In the last five years, Australia has started to turn that corner and go back the other way.”

He says that now all the major banks are heading down the same path, this trend will prove to be good for both the consumers and the market. 

With the tagline ‘Determined to be different’, Switzer asks Brewis-Weston how good the bank is at knowing what customers want.

“I think we’ve moved a significant way in the last couple of years: we’ve made a significant amount of investment in our front line and in training, and in trying to get much closer to our customers,” says Brewis-Weston. “One thing we’ve learnt about our customers is that they’re not asking for a hell of a lot – just get the simple things right and have someone to be able to talk to. Every business out there feels like they have a unique set of problems and really just wants someone to be able to talk and think through their financing options in an intelligent way.”

Brewis-Weston says banks were withdrawn from the frontline five to ten years ago, and this is where the Commonwealth Bank strives to be different. And while he says they’re not where they want to be in terms of service to their customers at this point, they’re “well on the way in the journey” and have slated further investment over the coming months to reach a level of world class, small business service for customers.

Good news comes as no surprise

Brewis-Weston says the recent (relatively) good news on economic and business front hasn’t come as a surprise.

“I’ve been a fraction on the optimistic side. But even now, I’m still cautiously optimistic,” he says, adding that a rate rise of a couple of points may take the gloss off the market and predicts a potential W-shaped recovery. Still, he points out, revenues have held up and companies have shown that they can manage their cost base.

“It’s very difficult to read,” he admits. 

So what is his take on the barrage of conflicting headlines of late? Is an interest rate hike on the not-so-distant horizon? And if so, when?

“It’s always dangerous guessing the markets,” he says, “but if I was a betting man, I’d probably be guessing November.”

Of the recent stern words from the Reserve Bank in this regard, Brewis-Weston says they are simply a warning and an attempt to temper some of the exuberance they may feel has crept back into the markets again in the last couple of months.

“We’ve got to remember that we’re going into an environment next year where there’s significant global debt and we’ll all be out there – the banks included – to raise funds on that market,” he says. “I think the Reserve Bank is a little wary that when there’s a lot of demand and perhaps not so much supply of cash in 18 months that the driver then is price, which is interest rates.”

Early incremental rises, though, seem to be the order of the day.

“With the potential of the financial crisis, a lot of people held their breath and stopped investing; we might see that on the way up. Perhaps if we can temper that a little bit, we won’t need to go so hard or as fast.”

For advice you can trust, contact Switzer Financial Services.

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

 

Published on: Wednesday, August 26, 2009

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