Foreign banks’ engagement in the Australian market has matured considerably, says a top firm
In its latest “Foreign Bank Tracker,” MinterEllison found that there are now 23 Asian banks operating and owning local assets. The analysis, which covers 31 December 2009 to 31 December 2016, said that there were only 11 Asian banks operating in the country at the end of 2009.
Previous research conducted by the firm show a steady rise in Asian bank-held assets in Australia. For 2013-14, Asian banks grew their holdings 18% or $12.5bn. For 2014-15, growth was 19% or $15.5bn. For 2015-16, growth was 21% or $21bn.
“Looking at the picture over the past seven years, we see a staggering 228% cumulative growth, or $62bn, from 2009-2016,” said John Elias, MinterEllison partner.
More than half of the foreign banks that entered the Australian market in the past five years, or nine of 13, are from Asia, the report said, with four Asian banks entering the market in 2016-17 alone.
Elias, a specialist in finance, said that while new bank entrants typically tested Australian waters by participating in syndicated deals and lending to parties in the country they already have relationships with, recent trends show a more diverse entry strategy.
“Japanese and Chinese banks, who hold 81% of Asian bank-held assets in Australia, are leading the way, with growth acceleration in property, energy and resources, and infrastructure investments,” he said.
The trend may be sparked by more outside investors engaging with Australia.
“It's significant that many foreign banks are now well beyond merely establishing a footprint in Australia. Their engagement in the Australian market has matured considerably, so much so that they're lending on a bilateral basis and leading syndicates,” Elias said. “In short, they have evolved from relationship-based lenders to asset-based lenders.”
According to the analysis, after banks from large markets like India, China, and Japan entered Australia, they were followed by banks for Korea and Taiwan. However, a contrast is seen in European banks, five of which left the country between 2013 and 2016. Two more European banks, RBS and Barclay, look set to leave by the end of this year.
“When you compare the Australian assets of European and Asian banks, the gap between them has narrowed to just $54bn. In 2009, the gap was $169bn, more than three times what it is today,” Elias said. “It seems likely that in the next couple of years the assets of Asian banks in Australia will catch up to those of the European banks. While it's unlikely European banks will completely exit our market, their position has plateaued and looks to remain steady in the near term.”
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