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The Asia-Pacific Banking Sectors : A Company and Industry Analysis (October 2003)
Mergent, Oct 2003
Current Environment - Key Points
- In Japan, banks have made aggressive efforts to remove a sizable amount of bad loans from their balance sheets
Consequently, NPLs eased to US$376.99 billion in the second quarter of 2003, down by 15% from the corresponding quarter in 2002
- China's state-owned banks granted US$229.4 billion in loans in the first half of fiscal 2003, more than double the amount of loans issued in the previous year, while outstanding renminbi stood at US$1.8 trillion
- In South Korea, the Financial Supervisory Commission (FSC) has stepped up supervision of banks and disciplinary measures on credit card issuers as part of the latest government efforts to rein in galloping household debt
This was in response to increased total household debt, which rose two- fold to US$373.69 billion at end-June 2003 from US$187.00 billion a year earlier
- Taiwan's Ministry of Finance commented that the financial structures of the 18 domestic banks were still relatively unstable in light of their bad loan coverage ratio falling below 40%, while, at the end of June 2003, their NPL ratios exceeded 5%
Industry Profile - Key Points
- In the first half of fiscal 2003, 15 of the largest banks in Asia-Pacific posted a net loss of US$16.16 billion, a drop of US$23.28 billion compared with the first half of 2002, mainly due to the weak global economy and the huge fall in Japanese banks- net profit
- India's three largest banks showed a distinct improvement in the first half of fiscal 2003 with a 21.7% increase in net profit, driven by widening interest spreads and falling interest rates
- Since August 2003, banks in Hong Kong have implemented a credit data sharing scheme, whereby banks enter customer information into a common credit reference database that is open to inspection by all lenders
This was in response to rising bad loans and high severity rates in the region, with banks losing about US$1.67 million daily from credit card delinquencies
- To prepare China for the liberalization of its financial sector by 2006, the China Banking Regulatory Commission has made headway in uncovering scandals in the banking industry
Market Trends and Outlook - Key Points
- An evolution has taken place in Australia
Banks have shifted their focus from large corporations or cross-border lending to mid-sized businesses and capital market activities, thus causing a drop in the volume of corporate lending
- Asia-Pacific banks are increasingly looking to the IT industry to provide more efficient, secure and stable transaction systems, especially in foreign currency dealings and settlements
- Internet banking is taking off in Asia-Pacific at a staggering rate as more bank customers are connected to the internet
- A slow but gradual recovery in Asia-Pacific's banking sector is expected to take hold in 2004, owing to improved market sentiment, the announcement of a number of policy initiatives and the signing of the Closer Economic Partnership Agreement (CEPA) between Hong Kong and mainland China
- As banks diversify into consumer banking, more banks are expected to adopt risk management infrastructure in the form of credit bureaus as a remedy to rising bad loans and to monitor debt levels of existing and prospective customers
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