Continuing economic growth in the Asian economies is reflected in the further growth of the banking sector, with increased growth in corporate loan books as businesses seek to finance expansion to meet demand. However, in many countries in the region, growth in consumer lending has now outstripped growth in corporate lending.
In general, consumer loans are coming from a very low base and, from the banks’ perspective, increased retail assets in the credit portfolio are welcomed because they tend to improve the risk profile. The downside is the potential for credit card and other loan bubbles to develop and burst, impacting on the banks’ profitability, as has happened in the recent past, notably in South Korea.
However, at the moment The Banker’s Top 200 banks in Asia are buoyant, posting a 21.5% increase in aggregate
Tier 1 capital to $424.7bn, while aggregate assets increased 16.5% to $8278.1bn and aggregate pre-tax profits rose 31% to $88.3bn.
Reviewing the major countries in the Top 200, Hong Kong banks increased their number in the listing to 10. They produced 9% of the aggregate pre-tax profit of the Top 200, generated from only 5.8% of the aggregate assets.
Losses among Taiwanese
Taiwan’s pre-tax profit recovery faltered this year with an aggregate of $2126m, down 57% on the previous year, from the largest group of banks (39) in the list. Eleven banks in the Top 200 recorded pre-tax losses and of those, eight were from Taiwan. A number of other Taiwanese banks had a steep decline in profits. Consolidation of Taiwan’s banking sector continues to inch forward with the emergence of financial holding companies, although reporting of regulatory capital and other financial parameters for such entities seems to be at variance with the requirements for individual banks.
China remains the economic powerhouse of the region and its largest banks dominate the listing again this year, occupying the top three places. China Construction Bank moves into first place this year following its successful initial public offering (IPO) in 2005, which helped to raise its Tier 1 capital to $35,647m. Industrial and Commercial Bank of China (ICBC) was in second place with $31,670m, and Bank of China was on its tails with $31,346m. The latter had a successful international IPO in May, raising in excess of $9bn, followed by a domestic IPO. ICBC has yet to come to market, although it was planning to do so this autumn.
Chinese banks, of which there are 30 in this year’s list, one more than last year, account for 32% of the aggregate Tier 1 capital of the Top 200, 40.9% of the aggregate assets and, this year, 31.5% of the aggregate pre-tax profits, compared with Australia’s 11 banks, which provided 20.9% of this figure from only 14.0% of aggregate assets and 14% of aggregate Tier 1 capital.
India’s banks hindered
The other rapidly developing economy in the region, India, is represented by 31 banks in the listing, which contribute just 7% of the aggregate Tier 1 capital, 6.6% of the aggregate assets and 7.0% of aggregate pre-tax profits. The banking industry remains highly fragmented, and failure to improve productivity has hindered the sector’s ability to take advantage of the economic boom.
