Asia banking on expansion
0 Comment(s)
Print
E-mail China Daily, May 5, 2014
Banks in Asia are expanding among the rich and the less affluent.
At one end of the financial scale, banks are looking to expand among the growing population of the region's wealthy.
Some time this year, the Asia Pacific will become home to the largest concentration of high-net-worth individuals in the world. The number of rich people in the region has grown by about a third since 2007, much faster than the rest of the world, according to RBC Wealth Management, a Canadian bank.
There are around 4 million HNWIs in the Asia Pacific who, by next year, should control almost $16 trillion in assets.
Around half of the region's total is estimated to be in Japan; more than 160,000 are in South Korea; China is moving toward three quarters of a million.
Banks are also looking to expand on the other end of the affluence scale.
Asian banks are reaching out to the 600 million people around the region that do not have access to banking services. According to the World Bank, which did a huge global study of access to financial services in 2012, 45 percent of adults in the region says they did not have a bank account.
The numbers vary a lot from country to country. The Global Financial Inclusion Indicators suggest only 4 percent of adults in Cambodia have a bank account, while more than 60 percent have one in Malaysia and the Chinese mainland.
The unserved market of hundreds of millions of people is a powerful incentive for banks to expand.
In terms of geography, banks are looking to reach further afield in their home markets and to tap into regional growth, particularly in China.
A recent acquisition in Hong Kong by Oversea-Chinese Banking Corp, Singapore's second-largest bank, underscores this trend but also highlights the dangers of this expansionary drive.
OCBC, which owns Bank of Singapore, announced plans on April 1 to acquire Hong Kong's Wing Hang Bank for HK $129 ($16.63) per share in cash, considerably more than the HK $84 per share that Wing Hang was fetching last September. The deal is worth HK $38.43 billion.
"Singaporean banks have been seeking expansion overseas, mostly in Southeast Asia," says Jonathan Koh, a bank analyst at UOB Kay Hian. Koh is positive about the OCBC deal and points out that the bank has been expanding in Hong Kong and the Chinese mainland since 2008.
OCBC's competitor DBS has also sped up its regional push since 2010. In 2011, Singapore's DBS Bank bought Hong Kong's Dao Heng Bank for HK $45 billion, 3.3 times its book value. That acquisition was not exactly a successful one, ending in a S $2.1 billion ($1.67 billion) write-down to DBS due to its deteriorating credit quality.
DBS is OCBC's biggest rival in Singapore and is now the seventh-largest bank in Hong Kong. OCBC has 16 branches in the Chinese mainland, one in Hong Kong and one in Taiwan.
The OCBC deal with Wing Hang, a solid Hong Kong bank with operations in the Chinese mainland, should give OCBC stronger footing there.
Go to Forum >>0 Comment(s)