Asian banking landscape post-crisis part 1

Take a moment and picture what the post-crisis Asian banking landscape will look like: A massive exodus of global giants will undoubtedly accelerate a shift of power from multinationals to regional players. But who can fill the vacuum?

Take Royal Bank of Scotland, for example, after an embarrassing near-death experience, the bank has no other options but to bail out on its Asian adventure by selling most of the emerging markets assets.

Banks like UBS, heavily bruised by staggering write-downs and layoffs, has undergone restructuring and refocused on its core wealth management business in Switzerland, this one is probably not fit to come back anytime soon;

Credit Suisse, the other more resilient Swiss-made, is also getting calls from home, requesting it to scale down on international activity. Given the uncertainty surrounding EU’s imminent financial overhaul, it’s perhaps safe to assume, both in the short-term, have got enough problems to worry about on the home front.

The relatively well-off Deutsche Bank will probably be still standing firmly thanks to a substantially less exposure to subprime; in fact, it’s doing pretty well in comparison to its peers.

Goldman, Morgan Stanley and JP Morgan, rising from the dead, will still be allowed to play, but their radical conduct of business is no longer welcome. Macquarie Bank, ditto.

In short, the investment banking industry will be left out cold for a long while; the traditional banking will enjoy a rock star status in the coming years, as China will be under more pressure to convert its export-driven model to one that’s driven by consumption. This will be done by opening up more avenues to facilitate efficient cross-boarder transactions and encourage Chinese companies to foray into the international market as a way to channel out the “hot money”. The successful implementation calls for a more orderly financial environment and the support of liquidity through bank lending.

The reckless-borrowing and living-on-credit way of life does not warm to the Chinese; much less the fancy, complex securitization mumbo-jumbo, the vast majority of citizens, the growing Chinese entrepreneurs and the highly educated middle-class will be the driving force of consumption. As they become more and more financially savvy, they will turn to banks for financing advice, business loans, and overseas investments. The domestic banking sector so far has been largely uninspiring.

Black horses will emerge from Australia, having enjoyed the close proximity to the world’s engine over the past decade, now the time is ripe for the Aussies to venture beyond natural resources and transform itself into a services-oriented growth model. Comparing with developing economies, the banking industry in Australia is highly sophisticated, industry regulations are light years ahead of that in the U.S.

Among the four largest banks in Australia, ANZ will be the first to grab those low-hanging fruits, it has put in place an articulate Asian expansion strategy and vowed for becoming a super regional bank by the year 2012.

The bank appears relatively healthy despite a growing amount of bad loans; in fact, all of the Aussie banks have come into the crisis much better prepared than their international counterparts. This lucky nation is armed with one of the best financial regulatory bodies and banks that are more prudent in terms of lending policies.

ANZ has recently raised AUD$2.2 billion from shareholders as it seeks to bid for Royal Bank of Scotland’s Asian business units. The bank’s Tier 1 ratio, a measure of financial strength has risen as a result of capital injection, given ANZ more space and flexibility in pursuing strategic growth.

While the other Aussie banks either become too averse to overseas investments or lack the capacities to venture out of their homeland, ANZ has been proactive in negotiating the opening of 20 branches in China to further establish itself as one of the leading Asian banks.

However, the road ahead is not without obstacles, aside from economic uncertainty; ANZ will be spending much of its time keeping a close eye on the more prominent regional players, such as Standard Chartered Bank and HSBC, while holding domestic competition at bay.

Then again competing with those super rich Chinese banks is not a piece of cake.