Commercial lending in a ‘credit crisis’

A non-bank boss has warned that the commercial lending sector is currently experiencing an “Australian version of a credit crisis” as funding at the big end of town dries up.

Equity-One managing director Dean Koutsoumidis told Mortgage Business that the current “stand out trend” in the commercial lending sector is the “lack of liquidity in institutional banking.”

Up until about six to 12 months ago, commercial borrowers enjoyed what Mr Koutsoumidis calls “a lot of easy credit and cheap credit” from the major banks. But the big four have since tightened up and placed restrictions on commercial funding.

“It’s wonderful for us,” Mr Koutsoumidis said. “It’s a perfect world for my model of business.”

“The current climate won’t be forever, there might be some further tightening by the major banks but eventually they're going to want to re-enter the market and the regulators will be perhaps a bit more relaxed about the state of property values and you will see conditions changing to what consumers prefer.”

He added that any loosening in commercial credit from the big banks could be more than 12 months away. Other non-bank lenders, such as commercial property financier Thinktank, have a different view.

Peter Vala, head of sales and distribution at Thinktank, believes regulatory intervention of a “similar nature” to that seen in the residential lending sector is on the cards.

"Evidently at the moment, the emerging trends are revealing themselves in pending regulatory intervention in commercial,” he said.

Mr Vala added that regulatory action would pertain especially to bank lending, which was observed was “not consistently or well reported on.”

On 8 March APRA wrote to ADIs warning that many banks have fallen “well short of expectations” regarding portfolio controls for commercial property.

[Related: APRA’s next target: commercial lending

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Lucy Dean

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