More and more brokers and non-bank lenders are shifting into SME lending. Is NAB prepared to face these challenges head-on?
Andrew Irvine (pictured), chief executive of Australia’s largest business bank NAB, has found himself under scrutiny from shareholders over his management style and love of a stiff drink.
Like most grown adults in Australia, Irvine is not averse to an alcoholic beverage, but according to reports, major investors have grown anxious over both his drinking habits and general managerial style.
For the record, while the AFR story that set chins wagging cited “serious concerns” from investors over Irvine’s drinking habits at company events, there are no allegations of inappropriate behaviour towards staff members.
But the recent departure of highly respected chief financial officer Nathan Goonan for rival Westpac was a clear blow to NAB and one is likely keeping Irvine up at night. A suitable replacement has yet to be found.
NAB’s share price has remained buoyant and in-line with other major banks, aside from, of course, Commonwealth Bank, which seems hell bent on notching up price-to-earnings multiples that defy gravity.
It beggars the question: What are investors really worried about?
NAB versus the non-bank lenders
As the self-described largest business lender in Australia, NAB has arguably the most to lose from the shifting sands of the business-lending zeitgeist.
As it stands, NAB’s SME franchise Business & Private Banking (B&PB) increased deposits by 7% and lending by 8% in full-year 2024 results. The segment brought in some $3.26 billion in cash earnings on net operating income (NOI) of $8.3 billion which, while flat year on year, substantially outperformed the personal and institutional banking segments.
For comparison, Westpac’s comparable segment, Business & Wealth, delivered $2.34 billion in cash earnings on a $6.14 billion NOI; ANZ Commercial brought home $1.34 billion on $3.5 billion NOI; and CBA Business Banking $3.78 billion on $8.6 billion NOI in their respective 2024 annual results.
While NAB’s status as a business-lending powerhouse is unlikely to change, the continual rise of the non-bank lending challengers is something that the bank, and therefore Irvine, has to contend with.
According to the latest SME Growth Index Report from ScotPac, more than half of Australia’s SMEs are now planning to use non-bank lenders to support new investments. In 2014, that number was just 7%.
Demand for non-bank financing surged to a record 55% in the first half of 2025, marking a 7% increase from the previous year. SME owners pointed to quicker approval times, more flexible lending criteria, and a broader range of funding options as the main drivers behind this shift.
At the same time, the share of SMEs planning to use traditional bank lenders fell from 42% to 30% over the past year.
Nearly 100% of non-bank lender commercial loans originate through brokers; an obvious consequence of these non-bank lenders not having vast retail networks to sell through.
While their rates are typically higher, their flexibility has emerged as a killer app for Australian small businesses that have struggled to secure financing through traditional means.
The result? The number of brokers facilitating commercial loans increased by more than 24% year on year as of September 2024, according to the Mortgage and Finance Association of Australia (MFAA)’s latest Industry Intelligence Service report.
A record 7,000 brokers processed commercial loans through their aggregator, with the total value of settled commercial loans reaching almost $23 billion – a 31.2% increase from the previous year.
Between September 2019 and September 2024, the total value of mortgage brokers’ commercial loan books nearly doubled, rising from $43.1 billion to $85.9 billion.
Just as the broker channel has become the predominant force in mortgage finance over the past two decades, the channel is now eating up more and more of the commercial lending space.
Exact figures are hard to come by, but general industry consensus has broker share of the commercial market at anywhere between 30% and 40% (compared to close to 80% in the home loan market). This is expected to rise.
The challenge for NAB – and its Big Four contemporaries – will be in positioning itself as an attractive option for the increasing number of SME borrowers placing their trust in brokers to get them the best deal.
For NAB’s part, it recognises the value that brokers bring to small businesses.
“The role of the commercial broker has never been more important,” said NAB in its Commercial Broker Report 2025, published earlier this month. “As the trusted point of contact for business owners navigating unpredictable conditions, commercial brokers are being asked to do more than source finance.
“In many cases, businesses rely on their brokers to provide clarity, cut through the noise, and offer strategic solutions that reflect a deeper understanding of their businesses in a high-stakes operating environment.”
True, the majority of small-business lending still comes from the traditional banking sector, but the non-banks have increased their market share from around 12% in 2019 to more than 25% in 2025, per Australian Bureau of Statistics data.
Maybe that’s what’s got NAB shareholders spooked.
