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Speaker 1: Let's pick up where we left off last week on

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Speaker 1: small business lending. Figure show is softening across all bank

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Speaker 1: business lending A and Z our biggest bank of course,

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Speaker 1: actually going backwards on that. Over All the growth rates

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Speaker 1: dropped from six percent in twenty thirteen. This is for everyone,

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Speaker 1: not just ANZ six percent in twenty thirteen to one

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Speaker 1: and a half percent. So what's going on here? Antony

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Speaker 1: Watson is the CEO of A n Z and is

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Speaker 1: with us.

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Speaker 2: Good morning, Good morning, Mike.

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Speaker 1: Is there a thing or not?

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Speaker 2: Well, there's a thing which I can explain. But the

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Speaker 2: thing I'm delighted to be able to tell you is

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Speaker 2: that we are growing and have been growing lending to

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Speaker 2: small and medium businesses, and that's been despite there's been

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Speaker 2: a lot more non bank lender activity. I can explain

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Speaker 2: why the reduction if you want me to it. Selling

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Speaker 2: you DC was the first thing that we did in

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Speaker 2: twenty twenty, and then the big impact really has been

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Speaker 2: a drop and lending to commercial property now there are

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Speaker 2: several reasons for that. You've got developments that would sort

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Speaker 2: of been done as interest rates were lower, that then

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Speaker 2: completed and then got paid off. Period of time you

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Speaker 2: had interest rate interest rates increasing, time's got tougher, so

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Speaker 2: not so much new demand. And our decision so that

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Speaker 2: this was our decision was to support our existing customers

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Speaker 2: as interest rates are increasing and things are getting tougher,

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Speaker 2: rather than taking on new customers. So the big drop

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Speaker 2: in our lending has been from property as opposed to

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Speaker 2: smaller medium businesses.

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Speaker 1: Okay, are you taking on new customers now?

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Speaker 2: Absolutely. We've had seven thousand customers sign up in the

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Speaker 2: first half to our how to campaign, and that's a

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Speaker 2: campaign about helping you know, you've got this this thing

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Speaker 2: about you've got to get through the first two years

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Speaker 2: when you're a new business. We've got that's helping them

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Speaker 2: get through that first two years.

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Speaker 1: Okay. And now those people new clients or people who

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Speaker 1: had borrowing elsewhere and came to you just in a

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Speaker 1: competition type way, it would be a.

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Speaker 2: Mix, and it will be new startups and reasonably new businesses.

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Speaker 2: That was part of the part of the requirements for

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Speaker 2: the package.

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Speaker 1: Okay. Part of the explanation last week seemed to be

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Speaker 1: that there are rules that you guys have to carry

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Speaker 1: extra capital to back up business lending. Is that true

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Speaker 1: and if it is true, how much of it is

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Speaker 1: it and is it a burden?

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Speaker 2: So yes, it's true. Exactly how much it is I

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Speaker 2: couldn't tell you off the top of my head because

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Speaker 2: it's once you get into business leaning, it's very risk

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Speaker 2: based and it depends on the individual business. But it

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Speaker 2: is risky a lending to businesses than lending to householders

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Speaker 2: who have a home and good equity in their home

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Speaker 2: to back up the lending. So that's the reason we

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Speaker 2: hold more capital. It isn't a constraint. We're not constrained

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Speaker 2: with our capital. We don't sit there and think we'd

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Speaker 2: rather do lending to housing and to businesses. We're open

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Speaker 2: to both. We're interested in leanding to anyone who's got

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Speaker 2: a good plan that shows that they can pay us

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Speaker 2: back over time.

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Speaker 1: Right, I'll come back to the planned thing in a moment.

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Speaker 1: Would you be generally thinking that this view that you

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Speaker 1: hold is the view of all the major banks in

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Speaker 1: the country in terms of lending to business overall, I.

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Speaker 2: Would suspect so, yes, But you do have to look

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Speaker 2: through the numbers. You know, the Reserve Bank numbers that

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Speaker 2: they publish are reasony bok. Because they're at a noble business. There. Well,

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Speaker 2: another thing that you know, we see in our portfolios

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Speaker 2: are lending to very large institutions. I think we've been

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Speaker 2: out had about seven billion dollars out since the time

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Speaker 2: I joined the bank sixteen years ago. Because as soon

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Speaker 2: as your lending gets to say one hundred and two

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Speaker 2: hundred million dollars, you want to syndicate that amongst a

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Speaker 2: lot of banks so that you're still breading the risk,

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Speaker 2: and often you'll get them to borrow their own money

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Speaker 2: in the debt capital market. Good.

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Speaker 1: I'm glad to hear this explanation because what I couldn't

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Speaker 1: work out in the numbers is that there seems to

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Speaker 1: be and in fact, I know there's a record number

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Speaker 1: of business sales in this country. There's never been more

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Speaker 1: interested in buying businesses, and I'm assuming some of those

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Speaker 1: people at least need to borrow from banks and therefore

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Speaker 1: are borrowing to buy businesses.

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Speaker 2: Yes, but I think the thing to remember there is

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Speaker 2: the difference between equity and debt funding. So the first

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Speaker 2: thing you need is you need some cattle behind you,

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Speaker 2: because the minute you take on a debt, you're having

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Speaker 2: to pay interest on that. So you know, we see

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Speaker 2: businesses that are undercapitalize. It and it's important that you

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Speaker 2: also have their equity behind you when you start a

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Speaker 2: business as well.

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Speaker 1: Okay, one of the credits we got when we raised

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Speaker 1: this last week was raised last week was that there's

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Speaker 1: no one in the bank. And this is not necessarily

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Speaker 1: you specifically, but it's banks generally that aren't business specialists.

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Speaker 1: In other words, you do it all by a computer.

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Speaker 1: You tap in a few numbers and some answer comes back,

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Speaker 1: and you've got it all you haven't got Is that

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Speaker 1: true or not?

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Speaker 2: We have? Oh, I can't give you the number of

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Speaker 2: the top of my head, but we have many business

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Speaker 2: specialists who are sitting ready to help our customers. And

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Speaker 2: I say, feel like they're not getting to help. They

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Speaker 2: need get them to email me.

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Speaker 1: Right, So there are people right broadly speak at mortgage rates.

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Speaker 1: Where are we heading? What do you think for July

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Speaker 1: and August? On the Reserve Bank? Go on, give us

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Speaker 1: the big big economic read here, Antonia.

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Speaker 2: I don't know. I know that Sharon zoln is saying

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Speaker 2: that they're probably might be seeing some more decreases. The

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Speaker 2: problem is you've got this uncertainty and got it in

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Speaker 2: speaking about business. Uncertainty is the worse thing for business

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Speaker 2: I mean, could the current situation in the Middleast increase

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Speaker 2: oil prices and have a knock on effect and suddenly

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Speaker 2: we've got inflation again and the Reserve Bank can't lower rates,

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Speaker 2: or could it lead to a recession and therefore they

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Speaker 2: do lower rates to simulate the economy. I just you

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Speaker 2: haven't seen the situation with as much uncertainty.

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Speaker 1: I think maybe would you at a drink after work

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Speaker 1: when they go well what's new Zealand feel like, what's

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Speaker 1: your answer? What's the word you were using?

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Speaker 2: My answer is sort of green shoots, but uncertainty. So

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Speaker 2: I think the situation we're in now is that whilst

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Speaker 2: we can see some improvement, you can see milk prices

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Speaker 2: and agree and interest rates coming down, so people have

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Speaker 2: got more money in their pockets. I think we've just

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Speaker 2: not quite got the confidence because of that uncertainty to

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Speaker 2: spend it on going out to dinner or spend it

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Speaker 2: on investing something in your business.

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Speaker 1: Yeah, good, andsight. I appreciate time as always, Antonia Watson.

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Speaker 1: Hopefully that answered at least most of our questions.

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Speaker 2: For more from the Mic Asking Breakfast listen live to

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