The Asia Pacific banking space is undergoing signicant change. Market forces are pulling international players out or prompting them to downsize their operations to focus on core business, and pushing peripheral players (mainly Australian and Japanese) in as they seek opportunties away from slow-growing home markets.
Malaysian and Singaporean banks are benefiting from first-mover advantage, mainly due to the maturing of their domestic markets and their established presence in the region. Indeed, banks from these countries dominate the top tier of the table below. The ASEAN Banking Integration Framework will likely accelerate these trends, as it aims to facilitate cross-border operations by removing market entry barriers.
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However, the desire to create “national champions” that can compete with established regional players may limit the opportunities in some markets. Taiwanese regultors have now relaxed the rules that limited offshore investment by domestic banks. It is notable that Taiwanese banks are absent from the table below. In markets that are aiming to create national/regional champions, regultors are likely to raise capital requirements, forcing consolidation.
On the other hand, countries that are at earlier stages of economic development – such as Indonesia, Cambodia, and the Phillipines – may present better opportunities for growth. In the Phillipines, restrictions on foreign ownership of domestic banks have been reduced.
The Asia Pacific regionals are likely to benefit most from the unfolding changes due to the efficiency of their operations, their digital capabilities, and their strong brand recognition.
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