Veda's Business Credit Demand Index: October to December 2011
Veda, Asia Pacific’s leading provider of commercial and consumer data intelligence and insights today released the results of the October to December 2011 Business Credit Demand Index, which confirmed a strong recovery in the rate of credit applications by businesses since 2010. Business credit enquiries into the Veda bureau across business loans, asset finance and trade credit increased 7.3% year-on-year and 3.6% for the full calendar year in 2011.
“Following a long period of uncertainty, it is good to see some uplift driven by better business conditions and more improved credit management practices.” said Moses Samaha, Head of Commercial Risk at Veda.
Business loan requests continued to show strong growth during the last quarter of 2011, up 10.5% versus the same period in the previous year and up 8.8% for the full calendar year. This has been driven predominately by corporate loans and overdrafts. Moses Samaha commented: “We’ve had two interest rate drops in November and December, which have no doubt stimulated growth in business lending volumes. The business market could also be the new battle ground for the banks given the softness of consumer credit demand”.
Trade credit demand also saw a surge for the December quarter, up 7% versus the same period in 2010, but showing overall flatter growth levels of 0.7% for the full calendar year.
Asset finance increased moderately by 4.2% in the last quarter of 2011 compared with the same period in 2010, with an overall growth of 2.7% for the full calendar year.
“It has been two years now since the introduction of the government stimulus packages, so I believe the growth we are seeing in asset finance is reasonable as businesses get back in the market for assets, and particularly automotive financing.” said Moses Samaha.
Veda’s data shows that small to medium sized businesses (SMBs) generated the greatest amount of credit activity. SMBs account for only 6.5% of all businesses but they were responsible for 42% of commercial credit enquiries in the December quarter. This is consistent with trends observed over the same period last year. At the same time, SMBs appeared to be suffering from a high default rate: micro businesses with 5-9 employees, which represent 6% of all companies, were accountable for a quarter (26%) of defaults. Regional changes included a slightly higher default rate in Queensland and fewer defaults in New South Wales.
“Whilst there are initial signs of positive growth in credit demand across some parts of the market, challenging business conditions may actually be contributing to increased credit management scrutiny in smaller sized and newer organisations” said Moses Samaha. “When looking at the different industries, construction (19%), retail (11.7%) and manufacturing (13.8) continue to show the largest volume of credit applications. These are all capital-heavy sectors so it is to be expected and consistent with previous quarters. Mining (0.9%) and wholesale trade (6.3%) represent a much smaller volume of enquiries but a disproportionate amount relative to sector size,” Moses explained.
Regionally, all states except ACT and Tasmania recorded year-on-year gains for the quarter.
Victoria reported the greatest volume of growth year-on-year at 12.8% followed by Western Australia (7.4%), South Australia (6.4%), Queensland (5.4%) and New South Wales (4.8%).
Key Index Statistics: