Welcome to the Fear and Greed Business Interview. I'm sure and Alma, it's probably inevitable. But as we shift increasingly into a world of digitalization and AI, bank customers are wanting more of a personal touch, and that's particularly true for small and medium sized businesses. My guest today is the leader of a challenger bank operating in a space dominated by the Big four. Bank of Sydney was founded back in two thousand and one and as it's grown has increased its focus on SME clients. Milos Sulicich is the CEO of Bank of Sydney, which works with Blue Chip Communication. A great supporter of this podcast, he joins me in the studio. Milos, welcome to Fair and Greed.

Welcome to the Fear and Greed Business Interview. I'm sure and Alma, it's probably inevitable. But as we shift increasingly into a world of digitalization and AI, bank customers are wanting more of a personal touch, and that's particularly true for small and medium sized businesses. My guest today is the leader of a challenger bank operating in a space dominated by the Big four. Bank of Sydney was founded back in two thousand and one and as it's grown has increased its focus on SME clients. Milos Sulicich is the CEO of Bank of Sydney, which works with Blue Chip Communication. A great supporter of this podcast, he joins me in the studio. Milos, welcome to Fair and Greed.

Thank you for having me.

Thank you for having me.

Sean give me the elevator pitch on Bank of Sydney.

Sean give me the elevator pitch on Bank of Sydney.

Bank of Sydney started in two thousand and one was then called Laky Bank. It was set up by a Greek Cypriot bank in two thousand and one and now it is just a bank, foreign owned bank in Australia operating principally in the SMB market. So we have a lot of business lending on our books, but also a lot of home lending which is attached to small businesses across the country.

Bank of Sydney started in two thousand and one was then called Laky Bank. It was set up by a Greek Cypriot bank in two thousand and one and now it is just a bank, foreign owned bank in Australia operating principally in the SMB market. So we have a lot of business lending on our books, but also a lot of home lending which is attached to small businesses across the country.

How does a challenger bank operate compete against the big four?

How does a challenger bank operate compete against the big four?

It's always hard operating against the big four. They really are big banks in world terms. But from a small banking point of view, we are focused on helping people create genuine value. So we've got relationship bankers out in the market who are working with their customers to help their customers create value, looking after their customers in times of need, and also looking after their customers when their customers need something and see an opportunity.

It's always hard operating against the big four. They really are big banks in world terms. But from a small banking point of view, we are focused on helping people create genuine value. So we've got relationship bankers out in the market who are working with their customers to help their customers create value, looking after their customers in times of need, and also looking after their customers when their customers need something and see an opportunity.

Okay, can we just take a step back here, So we're all very familiar with the big four banks there are I mean you're a foreign owned bank as opposed to a locally owned bank, right, Not that that really matters that much, but all banks, when you have a word bank attached to your name, you have the rules and regulation that the regulator sets are as relevant to you as they are to come off bank. Correct. So I'm just thinking in terms of safety in that type of thing.

Okay, can we just take a step back here, So we're all very familiar with the big four banks there are I mean you're a foreign owned bank as opposed to a locally owned bank, right, Not that that really matters that much, but all banks, when you have a word bank attached to your name, you have the rules and regulation that the regulator sets are as relevant to you as they are to come off bank. Correct. So I'm just thinking in terms of safety in that type of thing.

Absolutely. So to get a banking license is really hard. To maintain your banking licenses really hard. You have to have strong capital ratio, so we've got a twenty percent capital ratio. You have to have strong liquidity, you have to have the best risk management systems in the country in the world. We've got a very strong regulator in Australia and OPERA and APRAA do a wonderful job of regulating banks and keeping banks strong, and so we're all strong. But competing for a small bank, competing against large banks, you have to be different, and we see our difference as being able to provide a strong relationship model to our customers. So the bankers, we've got a very experienced they've all been here a long time. They've all had got a lot of scars on their back from things that they had to do in the past with customers, and they help their stomers through the good times and the bad times. We've got a very very strong credit department. As I said, the bank's been going in since two thousand and mine. We've actually never suffered a loss a credit loss in that time.

Absolutely. So to get a banking license is really hard. To maintain your banking licenses really hard. You have to have strong capital ratio, so we've got a twenty percent capital ratio. You have to have strong liquidity, you have to have the best risk management systems in the country in the world. We've got a very strong regulator in Australia and OPERA and APRAA do a wonderful job of regulating banks and keeping banks strong, and so we're all strong. But competing for a small bank, competing against large banks, you have to be different, and we see our difference as being able to provide a strong relationship model to our customers. So the bankers, we've got a very experienced they've all been here a long time. They've all had got a lot of scars on their back from things that they had to do in the past with customers, and they help their stomers through the good times and the bad times. We've got a very very strong credit department. As I said, the bank's been going in since two thousand and mine. We've actually never suffered a loss a credit loss in that time.

Never stuffered a credit love.

Never stuffered a credit love.

Ever suffered a credit loss. Because our credit department, in my view, the best in the country. So they can actually help customers structure a deal in the right way and then smme customers structure a deal in the right way that looks after the customer and looks after the bank at the same time as well, so you can be assured that if we're lending your money, we're confident that you can pay it back, because you only want to lend money to people that can pay it back.

Ever suffered a credit loss. Because our credit department, in my view, the best in the country. So they can actually help customers structure a deal in the right way and then smme customers structure a deal in the right way that looks after the customer and looks after the bank at the same time as well, so you can be assured that if we're lending your money, we're confident that you can pay it back, because you only want to lend money to people that can pay it back.

This sounds very one on one and I'm trying to put that in terms of AI and technology, which are the big banks, particularly spending a lot of money on Where do you sit? Where does Bank of Sydney sit in terms of the need for personal relationships back by technology as opposed to technology relationships back by personal.

This sounds very one on one and I'm trying to put that in terms of AI and technology, which are the big banks, particularly spending a lot of money on Where do you sit? Where does Bank of Sydney sit in terms of the need for personal relationships back by technology as opposed to technology relationships back by personal.

So if you're going to have a a relationship lead bank, you need to be cost effective and so having back end technology and the best back end technology is paramount because it can help take out back end cost. Now we are right in the middle of doing the largest project that we've ever done the bank in replacing a core banking system and our internet and mobile technology as well. So we need to have very strong customer facing technology which has got some AI components to it as well, because everything has got some AI component to it nowadays, but also a very efficient and in our case will be a cloud based core banking system, which means that we remove a lot of the operational technology requirements from us and that goes to our provider and they do it at scale, so we get scale benefits while still being a small bank. That's really critical because we have to maintain we have to reduce our costs in the back end, which is not really customer adding value, to be able to add value to our customers at the front end by having these experienced bankers and credit people that they're able to talk to them and help them well.

So if you're going to have a a relationship lead bank, you need to be cost effective and so having back end technology and the best back end technology is paramount because it can help take out back end cost. Now we are right in the middle of doing the largest project that we've ever done the bank in replacing a core banking system and our internet and mobile technology as well. So we need to have very strong customer facing technology which has got some AI components to it as well, because everything has got some AI component to it nowadays, but also a very efficient and in our case will be a cloud based core banking system, which means that we remove a lot of the operational technology requirements from us and that goes to our provider and they do it at scale, so we get scale benefits while still being a small bank. That's really critical because we have to maintain we have to reduce our costs in the back end, which is not really customer adding value, to be able to add value to our customers at the front end by having these experienced bankers and credit people that they're able to talk to them and help them well.

I think is interesting. Three of the big four are reported recently their growth in SME is I think it was five six percent. Market was much much higher than that, So it does seem that the challenger banks, it's a big group, seemed to be growing market share as one. I mean, obviously some will be doing well, some mon't be doing so well. Actually better than those big four.

I think is interesting. Three of the big four are reported recently their growth in SME is I think it was five six percent. Market was much much higher than that, So it does seem that the challenger banks, it's a big group, seemed to be growing market share as one. I mean, obviously some will be doing well, some mon't be doing so well. Actually better than those big four.

So our SME banking book grew by seventeen percent last year. How do we do that. We actually increase the number of our frontline bankers by about forty percent, So a lot of investment in frontline bankers and credit people to get out and meet more customers to be able to do more business, and that was seventeen percent growth in that part of the business last year. Twenty percent growth in deposits as well. Have deposits in order to be able to lend them money out, and we're one hundred percent deposit funded banks, so we don't have any wholesale funding in our funding stack, and so getting deposits is important for us. So having people on the front line talking to those customers who have money to deposit in the bank so that we can then lend it out to people who need to borrow what to see an opportunity.

So our SME banking book grew by seventeen percent last year. How do we do that. We actually increase the number of our frontline bankers by about forty percent, So a lot of investment in frontline bankers and credit people to get out and meet more customers to be able to do more business, and that was seventeen percent growth in that part of the business last year. Twenty percent growth in deposits as well. Have deposits in order to be able to lend them money out, and we're one hundred percent deposit funded banks, so we don't have any wholesale funding in our funding stack, and so getting deposits is important for us. So having people on the front line talking to those customers who have money to deposit in the bank so that we can then lend it out to people who need to borrow what to see an opportunity.

I mean, I stay with me and we'll be back in a minute. My guest this morning is Meli Silicitch, CEO of Bank of Sydney. So clearly you know a bit about SMEs. What are the biggest concerns for your customers at the moment.

I mean, I stay with me and we'll be back in a minute. My guest this morning is Meli Silicitch, CEO of Bank of Sydney. So clearly you know a bit about SMEs. What are the biggest concerns for your customers at the moment.

I think the biggest thing that customers are feeling at the moment is uncertainty. So through the course of this year, the election campaign effectively kicked off on the first of January. Election campaigns always caused some uncertainty in people's in people's mind and as we got through the election campaign. You see a lot of uncertainty now coming out of the US with tariffs and those sorts of things as well, and that's the thing that's causing our customers to think hard about what they do. Uncertainty is not a good thing for business because uncertainty gives you a question mark over what you're going to invest in. Do I invest? Do I not invest? People are looking for more certainty, so from our politicians locally here and internationally. They're looking for more certainty to be able to give them the confidence to invest. Business is actually going quite well for most of our customers. In fact, all of our customers are going really well. We've got a lot of developers on the books who are building housing that's going really well. We've got retail customers on our books and their businesses are going really well as well. But they're all looking for certainty in the economic and political environment.

I think the biggest thing that customers are feeling at the moment is uncertainty. So through the course of this year, the election campaign effectively kicked off on the first of January. Election campaigns always caused some uncertainty in people's in people's mind and as we got through the election campaign. You see a lot of uncertainty now coming out of the US with tariffs and those sorts of things as well, and that's the thing that's causing our customers to think hard about what they do. Uncertainty is not a good thing for business because uncertainty gives you a question mark over what you're going to invest in. Do I invest? Do I not invest? People are looking for more certainty, so from our politicians locally here and internationally. They're looking for more certainty to be able to give them the confidence to invest. Business is actually going quite well for most of our customers. In fact, all of our customers are going really well. We've got a lot of developers on the books who are building housing that's going really well. We've got retail customers on our books and their businesses are going really well as well. But they're all looking for certainty in the economic and political environment.

What about the interest rate cut recently and the hopes for a couple more Does that make much of a difference.

What about the interest rate cut recently and the hopes for a couple more Does that make much of a difference.

Well, that gives people more confidence, doesn't it, because they can borrow more. They've got a bit more leeway between what their outgoings are in terms of their interest costs and their principal repayments as well, means that they might have a bit more left over to invest in some more staff. I mean, small business have been sort of really watching their costs really tightly over the last couple of years. In particular, we've had a very big inflation spike comes through over the last few years. Now that's eased off, but the cost of doing things are still more expensive than it was a few years ago, so people have watched their costs. So interest rates coming down a really good thing for small businesses in particular, it gives them more confidence. It gives the more scope to invest and look for those opportunities that they've been looking for.

Well, that gives people more confidence, doesn't it, because they can borrow more. They've got a bit more leeway between what their outgoings are in terms of their interest costs and their principal repayments as well, means that they might have a bit more left over to invest in some more staff. I mean, small business have been sort of really watching their costs really tightly over the last couple of years. In particular, we've had a very big inflation spike comes through over the last few years. Now that's eased off, but the cost of doing things are still more expensive than it was a few years ago, so people have watched their costs. So interest rates coming down a really good thing for small businesses in particular, it gives them more confidence. It gives the more scope to invest and look for those opportunities that they've been looking for.

You mentioned that you've got a bunch of construction customers. It's surprising then you haven't had any credit losses. Obviously you're risk team does a good job, but is that sector getting back on his feet yet.

You mentioned that you've got a bunch of construction customers. It's surprising then you haven't had any credit losses. Obviously you're risk team does a good job, but is that sector getting back on his feet yet.

There is a huge demand for housing, a huge demand for housing in the country. The one thing that we can't get enough of, we'll build enough of is housing. And so the customers that we deal with now, our business model has been built on working with people who are doing small developments small developments, small developments and we grow with them or they grow with us. And so we know the customers that we deal with, and we've got long term customers said we've had, We've got some great bankers that have been with us for a long period of time and they grow with their customers and that helps us. So we understand the people and their businesses and what they're investing in. It also helps our clients because they get the confidence from us as well that they're not sort of going into something that's going to stretch them too much as well.

There is a huge demand for housing, a huge demand for housing in the country. The one thing that we can't get enough of, we'll build enough of is housing. And so the customers that we deal with now, our business model has been built on working with people who are doing small developments small developments, small developments and we grow with them or they grow with us. And so we know the customers that we deal with, and we've got long term customers said we've had, We've got some great bankers that have been with us for a long period of time and they grow with their customers and that helps us. So we understand the people and their businesses and what they're investing in. It also helps our clients because they get the confidence from us as well that they're not sort of going into something that's going to stretch them too much as well.

What about the regulatory environment? So sometimes you hear from the challenger banks that it's a bit unfair the big banks get a better ride. Now you talk to the big banks and they're saying, well, some of the apple regulations make it actually hard for us to lend them certain areas of the market. You don't do a hosshile funding, so you're getting all your funding off deposits. So there's sort of comparative advantage for Bank of Sydney. But what is the regulatory environment like this? Is it a level playing field?

What about the regulatory environment? So sometimes you hear from the challenger banks that it's a bit unfair the big banks get a better ride. Now you talk to the big banks and they're saying, well, some of the apple regulations make it actually hard for us to lend them certain areas of the market. You don't do a hosshile funding, so you're getting all your funding off deposits. So there's sort of comparative advantage for Bank of Sydney. But what is the regulatory environment like this? Is it a level playing field?

You think we don't believe it's a level playing field. The regulatory environment artificially make life tougher for small banks. The number of regulations and rules and laws that all banks have to comply with are massive, huge, and that that weighs itself heavier on small banks. Larger banks have departments of people looking after one small piece of regulation. There's a smaller bank. We have to be sort of jack of all trades in terms of regulations a bit and be across the whole, the whole lot of regulation. It's an unusual environment where you have smaller organizations in a a in an industry being penalized with heavier capital weights than the larger organizations. So the regular environments actually tipped against smaller banks. So the large banks get an implicit government guarantee on their funding, they get lower risk weights on their on their capital, and the two key things you need in banking is capital and funding. And so we think the environment's tipped a little bit too far against this smaller banks.

You think we don't believe it's a level playing field. The regulatory environment artificially make life tougher for small banks. The number of regulations and rules and laws that all banks have to comply with are massive, huge, and that that weighs itself heavier on small banks. Larger banks have departments of people looking after one small piece of regulation. There's a smaller bank. We have to be sort of jack of all trades in terms of regulations a bit and be across the whole, the whole lot of regulation. It's an unusual environment where you have smaller organizations in a a in an industry being penalized with heavier capital weights than the larger organizations. So the regular environments actually tipped against smaller banks. So the large banks get an implicit government guarantee on their funding, they get lower risk weights on their on their capital, and the two key things you need in banking is capital and funding. And so we think the environment's tipped a little bit too far against this smaller banks.

Do you expect that to change it all?

Do you expect that to change it all?

Well, there's a current review going on the Council of Financial Regulators with the ahrib'll c are doing a review into small banks at the moment in the small banking environment. That review is due to be given to the Treasurer in the middle of this year, so that's a month or so away and we understand there will be some recommendations come out of that. So we're waiting for the outcome of that review. We've made some we and the ABA and other banks have made representations to that review to look to see if something can be done to help make the environment for small banks better. And you have to remember that the MOSS is sort of four or five large banks in Australia. There's another fifty odd small banks in Australia. The small banks have driven some of the innovation. The core product in Australian banking is an offset mortgage or mortgage or an offset account that was developed by a small bank and released by a small bank in the early nineteen nineties as to find a competitive advantage. It's unique to Australia, right and it's one of our Everybody in Australia that has a mortgage gets one with an offset account because it gives you flexibility. Now, if it wasn't for small banks, we wouldn't have that, and so we believe that the innovation that could be provided by small organizations is wonderful for the Australian consumer. But we just need to have some of those shackles lifted a little bit.

Well, there's a current review going on the Council of Financial Regulators with the ahrib'll c are doing a review into small banks at the moment in the small banking environment. That review is due to be given to the Treasurer in the middle of this year, so that's a month or so away and we understand there will be some recommendations come out of that. So we're waiting for the outcome of that review. We've made some we and the ABA and other banks have made representations to that review to look to see if something can be done to help make the environment for small banks better. And you have to remember that the MOSS is sort of four or five large banks in Australia. There's another fifty odd small banks in Australia. The small banks have driven some of the innovation. The core product in Australian banking is an offset mortgage or mortgage or an offset account that was developed by a small bank and released by a small bank in the early nineteen nineties as to find a competitive advantage. It's unique to Australia, right and it's one of our Everybody in Australia that has a mortgage gets one with an offset account because it gives you flexibility. Now, if it wasn't for small banks, we wouldn't have that, and so we believe that the innovation that could be provided by small organizations is wonderful for the Australian consumer. But we just need to have some of those shackles lifted a little bit.

Mel Us, thank you very much for talking to Fear and Greed.

Mel Us, thank you very much for talking to Fear and Greed.

Thank yousponderful being here.

Thank yousponderful being here.

That was Melos Sulasitch, CEO of Bank of Sydney. This is the Fear and Greed Business Interview. Join us every morning for the full episode of Fear and Greed. Business news you can use. I'm Sean Elmer. Enjoy your day.

That was Melos Sulasitch, CEO of Bank of Sydney. This is the Fear and Greed Business Interview. Join us every morning for the full episode of Fear and Greed. Business news you can use. I'm Sean Elmer. Enjoy your day.