Capital One: Pressure from non-banks is hurting commercial lending

Capital One‘s commercial lending business is facing price pressure from a saturated market of lenders, including non-banks, that are pushing interest rates down. 

“Increasing competition from non-banks continues to drive less favorable terms in the commercial lending marketplace,” CEO Richard Fairbank told investors on Thursday.

Capital One isn’t alone in facing this pressure in the commercial lending market. In effect, all large banks that lend to businesses face pressure because of heightened competition, said Aite Group senior analyst David O’Connell.“There are too many institutions and too much capital chasing too few borrowers that is driving interest rates down,” he added.

As online lenders like BlueVine, Kabbage and OnDeck grow their customer bases, banks are looking for new ways to to reach this market. Capital One is achieving this goal partly by way of acquisition. In June, the companyacquiredBlueTarp, a Portland, Oregon-based business-to-business credit company. BlueTarp provides clients instant decisions and lines of credit of up to $1 million. The acquisition was aimed at expanding Capital One’s commercial loan servicing capabilities and offerings, including risk management, technology and information security.

Capital One also lends to businesses through its commercial card business, including its line of Spark-branded small business credit cards. The bankrecently told Bank Innovationthat middle-market companies, or those between $10 million and $500 million in annual revenue, could be a $5 trillion business opportunity for Capital One. Raj Dutt, head of product strategy for commercial cards at Capital One, said the bank also was using data analytics tools to differentiate from competitors.

Source: Bankinnovation.net

Powered by NewsAPI.org

Keywords:

Capital One • Commercial bank • Loan • Capital One • Commercial bank • Loan • Business • Price • Market saturation • Loan • Interest rate • Competition • Commercial bank • Loan • Chief executive officer • Richard Fairbank • Investment • Capital One • Commercial bank • Marketing • Business • Aïté • David G. O'Connell • Debtor • Interest rate • Loan • Kabbage • Capital One • Mergers and acquisitions • Portland, Oregon • Business-to-business • Company • Line of credit • Mergers and acquisitions • Capital One • Loan • Loan servicing • Risk management • Technology • Information security • Capital One • Commercial bank • Spark New Zealand • Small business • Credit card • Bank • Middle-market company • Revenue • Capital One • Advertising • Capital One • Analytics • Competition (economics) •