Many commentators have predicted that this century will belong to Asia, so it would seem natural that the region’s big banks start to make waves globally.
Recent months have seen a barrage of deals by financial groups including Australia’s Macquarie Group and Japan’s Nomura, which attest to the global ambitions of banking executives in the Asia-Pacific region.
Macquarie recently acquired Fox-Pitt Kelton Cochran Caronia Waller, the boutique investment bank with deep links in New York and London, and Delaware Investments, a US funds group with $150bn in assets under management.
Nomura last year snapped up the Europe and Asia operations of Lehman Brothers and is raising a further $5bn, partly to help bankroll a push into the US. Japan’s MUFG is expanding in the US after acquiring 20 per cent of Morgan Stanley.
Australia’s ANZ is beefing up its presence in Asian markets as part of a “super-regional” strategy and is preparing to take on western banks in the world’s fastest-growing economies.
Chinese lenders rank among the world’s top banks by market capitalisation and are looking to build overseas.
Since 2006, Industrial and Commercial Bank of China, the world’s biggest bank by market capitalisation and deposits, has struck deals with banks in Thailand, Indonesia, Macao, South Africa and Canada.
It is all a far cry from the aftermath of the 1997-98 Asian financial crisis, which exposed the poor lending practices and corporate governance of many of the region’s leading banks.
This time round, regional financial groups are taking advantage of the relative weakness of some troubled western groups to muscle in on territory previously regarded as out of bounds.
Asian banks in general, had limited involvement in structured credit products, have sound liquidity and funding structures, good earnings and capital buffers as well as access to funding from domestic markets.
According to Goldman Sachs research in Hong Kong, Asian banking sectors are “notably stronger” than many global peers. Average tier one capital adequacy is 9.5 or higher than counterparts in Spain, Germany and Italy.
However, financial strength alone will not translate into domination of global banking.
Analysts refer to the late 1980s when “Japan Inc” embarked on a global shopping spree. But its asset bubble popped and banks retreated to rebuild their domestic capital bases.
Whatever their problems, western financial groups such as Citigroup have global relationships and licences built up over the past century that will take some shifting. Tellingly, this week the US lender opened a retail branch in Vietnam – something no non-Vietnamese Asian bank has yet managed.
Local management capability and know-how, allied to financial firepower and ambition, will be crucial if Asian banks’ latest attempt to build their empires is to prove enduring.
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