bankers’ boot camp 2017 · thought leadership or training programs. the age of change bankers’...
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Below we bring together our insights and takeaways gained from the series. Feel free to share with your teams. Please get in touch with your local Grant Thornton partner or me directly if you would like to discuss any of these issues or opportunities, or to access any of our thought leadership or training programs.
The age of change
Bankers’ Boot Camp 2017
Last week capped off another highly successful Bankers’ Boot Camp series – bringing together senior bankers from all the major financial institutions in Brisbane, Sydney, Melbourne and Perth.Regulation and compliance were the issues most front and centre with our banking attendees, reflecting the increasing requirement to navigate new laws and guidelines arising from a record number of reviews, investigations and inquiries impacting the banking sector. From our live surveys conducted with almost 400 bankers, you generated some interesting ideas for a more innovative, productive banking environment – a look at these can be found below.
Our technical experts from legal, advisory and banking analysed the new safe harbour and ipso facto reforms in an interactive panel discussion, breaking down the likely impact of the changes on bankers and their customers via a hypothetical case study.
Matt Byrnes National Head of Restructuring Advisory Grant Thornton Australia
Property specialists CBRE provided insights regarding the local property market, with a particular focus on the inner city apartment developments and related issues, including foreign investment and over/under supply in our major cities.
Bringing together representatives from the major banks, alternate lenders, and the Reserve Bank, we then discussed the emergence of the shadow banking sector from a domestic and macro perspective.
We also shared our insights from conversations with our clients around how we are assisting them with working capital optimisation, including our observations that there is significant opportunity to further free up cash in many of your customers’ businesses.
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The options:• Advanced manufacturing• Scientific & medical• Food & agribusiness• Education• Hospitality & tourism• Health & aged care• Energy & resources
(including renewables)• Other
Grant Thornton Insights
Our health and aged care team is also seeing an increased focus on this growing industry and the knock-on opportunities for other sectors, like banking. The ageing Australian population has meant a number of financing opportunities have arisen. For instance financing for: consumer-driven home care service businesses; real estate and construction projects (new and converted buildings); and the consolidation of medical centres to ease the pressure on hospitals. In addition, there is a growing need for feasibility studies at the outset to support projects.
What you said
On a national basis, 45% of attendees said Health & Aged Care has the greatest prospects for lending growth. (48% in Brisbane, 44% in Melbourne, 34% in Sydney, 54% in Perth). The second industry for lending growth in all states was food and agribusiness.
The options:• Increasing competition from
fintech companies• Regulatory & compliance
pressures• Ability to achieve internal
efficiencies• Managing customer
expectations and related impact on brand
• Drive to increase margins and profits
On a national basis, 56.5% of attendees said regulatory and compliance pressures were the greatest risk of disruption. (57% in Brisbane, 45% in Melbourne, 56% in Sydney, 68% in Perth). There was no standout secondary risk area highlighted with the remaining options spread across the board.
45%Greatest lending potential: Health & aged care
56.5%Greatest risk: Regulatory and compliance pressures
Across the major cities, we asked the attendees the same four questions via an online poll.
Q Which industry has the best prospects for lending growth? Q What poses the greatest risk of
disruption to your organisation?
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1Using digitisation/AI to automate credit decisions and drive efficiencies in compliance.
2Better collaboration between regulators to reduce unnecessary costs.
3Moving further towards Chapter 11-style legislation to better promote entrepreneurial activity and value preservation in the Australian market.
Ideas to improve the banking environmentA number of interesting ideas were generated by our attendees. Here are the most common themes.
1The customer experience – improving the ease of doing business via embracing digitisation and automation (ie simplified electronic forms).
2Strategies to ensure relationship continuity for customers, resulting in enhanced customer engagement and retention.
3Agility – improving the speed of response times by bankers and streamlining decision making for customers.
Q If you had the power to change or introduce one law that wouldhave the biggest positive impact on banking, what would it be?
Q If you could focus on one thing in order to stay relevant tocustomers, what would it be?
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Safe Harbour reform
Using a hypothetical case study, our expert panellists discussed a number of scenarios designed to illustrate how the new law changes relating to safe harbour and ipso facto are likely to impact customers and bankers.
Some observations from the experts participating in our technical panel sessions around the country:
• Generally strong support for the safe harbour reforms and expectation the changes will enhance prospects for value preservation in distressed companies.
• Support for the changes to address ipso facto, however, disappointment that the changes are not retrospective – this will inhibit the intended benefit of the reforms and create practical challenges for restructuring practitioners and their clients and stakeholders.
• Directors of small-to-medium companies are likely to continue to ‘run the gauntlet’ by continuing to trade through the zone of insolvency. However, there is a strong risk that they will fail to ensure ongoing compliance with tax reporting obligations, employee entitlements (in particular superannuation) and maintenance and provision of books and records, meaning safe harbour protection will not be available in those situations.
• Voluntary administration should have enhanced value as a workout tool as part of a planned company restructure, rather than as a pathway to liquidation.
• Directors are well advised to engage early with their bank and key stakeholders to ensure support and buy-in to the restructure.
• Banks will be interested to understand not only the content of the restructure plan, but how the plan will be implemented.
• There is a risk of an increased prevalence of unregulated pre-insolvency advisors, who may lack the necessary skills to guide the company through a successful restructure.
You can view a guide to the changes prepared by our legal partners Henry Davis York and our snapshot to the key issues discussed during the panel sessions here. You can also contact one of the Grant Thornton partners to further discuss the impact of Safe Harbour on you and your customers.
Customer tales
A popular session each year, this is where we invite a customer to join us for a one-on-one interview, sharing their own story about their journey, their challenges and how they have engaged with their bankers and advisors to grow their business.
This year we heard fantastic growth stories from:
• Kim Carrigan (Wild Breads) – Brisbane• Angus Kennard (Kennards Hire) – Sydney• Sean O’Meara (Doshii) – Melbourne• John Foss (The Chia Co) – Perth
Doshii’s Sean O’Meara shares his story about how he saw an opportunity to better connect hospitality and retail point-of-sale and apps using technology and innovation.
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Working capital optimisation: freeing up cash
You can see our summary guide to working capital optimisation here.
If you would like to discuss how we can assist in freeing up cash in a customer’s business, please contact Graham Killer or Matt Byrnes, or your local Grant Thornton contact below.
Graham recently covered this topic on LinkedIn.
The program materials
You can access our insights and takeaway material from the Bankers’ Boot Camp event series here.
Shadow banking and alternate lenders
Becoming an ever more relevant concept for bankers and borrowers alike to understand, our panellists – including major banks, alternate lenders and the Reserve Bank – looked at the profileration of new non-APRA regulated entrants in the Australian lending market and what it means for the banking sector overall.
The key takeaways
• The emergence of a shadow banking sector improves access to capital for corporate Australia providing flexibility for some customers who are prepared to pay a premium for more flexible or covenant ‘lite’ debt packages.
• Alternate lenders can ‘fill the gap’ in certain situations where major banks have limited appetite for further lending. The property development sector is an example of where there has been a need in recent times.
• There were differing views from our panel specialists regarding whether further regulation of the alternate lending market is required: some bankers believe more regulation is needed; others suggest that to do so would impact the flexibility alternate lenders can bring to a transaction – the quid pro quo discussed by some on the panel is that the banks who are heavily regulated can, as a consequence, access a much lower cost of capital (from deposit takers).
• There’s potential for better collaboration between alternate and traditional lenders in the future – working together, with the borrower in the drivers seat, trying to find an innovative solution – where 10 years ago, this option may not have even existed.
• Alternate lenders make up around 13-15% of lending in the Australian market, compared to 25% in other developed economies in part due to structural differences, indicating the potential for future growth still remains.
The Perth audience hears from guest panellists, Norton Rose Fulbright’s Jake Howard and Remagen’s Simon Raftery.
CBRE’s Lloyd Jenkins and Gemma Alexander share their insights.
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Mark McCrindle (Melbourne)A social researcher and thought leader, Mark shared insights into the changing demographics of the Australian population and the impact for businesses. Reflecting on how we have evolved, Mark predicted even greater changes impacting the way we do business, our corporate culture and leadership and management styles required to manage the transition. Where many generations (with different languages) are co-employed, now unheard-of job titles will be the norm and other current important employee traits – like loyalty, physical presence in the office and spelling! – are less important.
Diane Smith-Gander (Sydney)Diane shared her thoughts on sustainability and urged that big business needs to drive innovation and change in Australia and not wait for our government to move Australia forward. She highlighted where Australia is behind: marriage equality, gender equality, housing affordability and energy policy. Diane noted that traditional retail businesses are behind in terms of their restrictive trading hours, making them vulnerable to online retail giants like Amazon, and that as our population of 24 million isn’t large enough to sustain organic growth for most businesses, looking overseas to other markets will be necessary to unlock new customers and drive innovation.
Dr Keith Suter (Brisbane)One of Australia's most influential global futurists and media commentators in the area of national and foreign affairs, our Brisbane audience heard Dr Suter’s perspective on recent world events and their impact at home and on the banking sector. He discussed this common theme of ‘disruption’ and its role in politics, economics and technology.
Dr Vanessa Guthrie (Perth)An expert in all things mining and resources, Dr Guthrie has seen all stages of this Australian sector: from periods of enhanced growth to the current more-uncertain times. Drawing from her experience as a key decision-maker and adviser to resources organisations over her career, she discussed not only the impact of the mining sector on the economy, but also how outdated social issues – like marriage inequality and the gender pay gap – are impacting growth.
Keynote speakersWe were fortunate to have a great mix of keynote speakers who shared their insights and observations. Here’s a snapshot of what they covered, and you can access their presentations and materials here.
Get in touch with the team
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