Australian banks could be on the shopping lists of their major Asian rivals. Credit Suisse, which has gained a growing market share in advising the big four banks, believes Asian banks will expand into Australia, as they follow the companies they finance into the market.
ANZ has been the most active Australian bank in expanding its Asian holdings, more recently through the acquisition of some RBS assets, although the Commonwealth Bank also has a growing stake in the Chinese Bank of Hangzhou.
Credit Suisse’s head of financial and insurance banking in Australia, Malcolm Ezzy, said the Asian banks had weathered the global financial crisis in strong shape and were now looking to expand. “It’s not just the Australian banks trying to develop an Asian strategy,” Ezzy said.
“The Asian banks are increasingly looking to grow their footprint in Asia, and Australia is a part of that.
“I think from here there will be a significant investment from the Asian banks into Australia and the banking system.”
The investment bank’s head of financial institutions banking for Asia-Pacific, Rob Jesudason, said the strength of the Australian banking system and the majors being four of only 10 AA-rated banks in the world would make them a target for offshore investment. “On the basis of wanting to grow beyond your natural home market one of the major drivers of that is to follow your customers,” Jesudason said.
“If you look at the investment by large Asian companies in Australia — if you’re a Chinese bank and your main corporate customers are investing in Australia, then it’s quite a natural next step to follow your customers into different markets.”
Jesudason said with the rising investment into Australia, there was increasing likelihood the major banks would step up their Asian investment as well.
“It makes enormous sense for the Australian banks to follow their customers into China, India and Southeast Asia.
“There is also the integration between the Australian business community and the Asian business community and that will result in regional banks doing more business.”
There is a rising expectation that the Australian banks will start to utilise more of the strong levels of tier-one capital built up during the crisis.
The top four banks have tier-one capital ratios, on average, of 8.5 percent, while the Queensland-based Suncorp sits at an ultra-conservative 9.9 percent.
Ezzy said that it was now unlikely the banks would reduce their capital to pre-crisis levels but could start to be pressured to use the cash to build value.
“I think that the capital raisings that the banks have done in the past 12 months were absolutely necessary to ensure that they maintain their investment capability,” Ezzy said. “We will never return to the historical lows of tier-one ratios we saw going into the crisis, but I think the right amount of capital lies somewhere in between where we were and where we are now.”