Foreign Banks in China 17 July 2012

Transcription

1 Foreign Banks in China Mervyn Jacob Financial Services Leader for China & Hong Kong William Yung Financial Services Advisory Partner for China

2 Introduction Surveyed 41 CEOs, senior executives and branch managers Seventh survey since 2005 Interviews conducted in Beijing, Hong Kong, Shanghai & Shenzhen from April to May

3 Participants ANZ Banco Santander Bank of America Merrill Lynch Bank of Montreal Barclays Bank BBVA BNP Paribas BNY Mellon Crédit Agricole Citibank Commerzbank Commonwealth Bank of Australia Credit Suisse Dah Sing Bank DBS Bank Deutsche Bank First Sino Bank Hang Seng Bank HSBC ING Bank Intesa Sanpaolo 3

4 Participants (cont d) JPMorgan Chase KBC Bank Mizuho Corporate Bank National Australia Bank Natixis Norddeutsche Landesbank Nordea OCBC Bank Rabobank Raiffeisen Bank International Royal Bank of Canada Scotiabank Société Générale Standard Chartered Bank The Bank of East Asia UBS VTB Bank Wells Fargo Bank Westpac Bank Wing Hang Bank 4

5 Growth 5

6 Foreign banks in China Profits more than doubled to RMB billion in 2011 Total assets up 23.6% to RMB 2.15 trillion Market share remains stable 181 foreign banks operating in China 6

7 Doubling in profitability in

8 Growth drivers Strong demand for credit among MNCs expanding within China Increased business from Chinese SOEs and private enterprises - Expanding offshore, favouring foreign banks and their global networks RMB internationalisation driving demand for derivative trading services among financial institutions and corporates 8

9 Strong growth outlook till 2015 Most expect revenue growth of at least 20% 17 forecast revenue to be above 30% 24 banks predict revenue growth of 20% or higher in 2012 Four target growth areas FI, MNC, SOE & POE 9

10 Debt capital markets offer greatest future opportunity 10

11 Interest rate liberalisation seen as advantageous Euro zone crisis and subdued state of US economy speeding RMB liberalisation Greater volume of RMB settlements China recently signed several multiple currency swap agreements Long term opportunities in cross-border settlements and cash management 11

12 Shanghai as an IFC 12

13 Foreign banks support Shanghai s IFC ambition Support Shanghai s ambition to become an IFC - foreign banks market share 12% in Shanghai - several banks have announced capital injections RMB internationalisation & interest rate liberalisation key to achieving this Half of the foreign banks interviewed say Shanghai s ambition has already influenced their business strategy 13

14 Shanghai as an IFC a compelling case Key figures 2011 (for Shanghai): GDP grew 8.2% US$437 billion in foreign trade flows 1,048 banking institutions, including 173 foreign firms Presence of central equity, foreign currency, futures and gold exchanges Major opportunities for foreign banks: Goal of becoming a top five derivatives trading hub globally by 2015 Financing for key industries: shipping, transport and infrastructure Growing volumes in trade financing, treasury and trading 14

15 Talent 15

16 Expected staff turnover in 2012 Staff turnover to pick up even more Movements within foreign banking industry Talent shortage remains top concern; impacting top line growth Salaries continue to escalate; over half of respondents forecast increase between 8% - 10% in

17 Where do they want to recruit? Respondents looking increase headcount to 55,000 by 2015 (from 35,000 currently) Priority positions - Relationship bankers (on the corporate side) - Risk management - Treasury - Legal/compliance 17

18 Challenges 18

19 The top challenges a five year trend 19

20 Other foreign banks emerging as competitors 20

21 Major drivers of change in China s banking industry Regulatory concerns continue to impact foreign banks Funding constraints (foreign debt quotas also a challenge) 21

22 Concern over expansion & complexity of regulations Fee-based income Cross border settlement restrictions Staged approval process Restrictions on level of investment in local banks and securities companies Chinese Basel III Loan loss provisions Capital requirements Funds distribution license Access to the bond market 22

23 China s regulators seen as supportive 23

24 Summary Commitment to China returns to pre-crisis level More growth opportunities as China shifts to a domestic-consumption driven economy Buoyant revenue growth expected over next three years Internationalisation of the renminbi & interest rate liberalisation - major opportunities Emphasis on organic growth Growing employment and turnover Tighter regulations & talent shortage major challenges Overall, China continues to be a critical and important market 24

25 Thank you This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors All rights reserved. refers to the network and/or one or more of its member firms, each of which is a separate legal entity. Please see for further details.

26 Foreign Banks in China Mervyn Jacob Financial Services Leader for China & Hong Kong William Yung Financial Services Advisory Partner for China