Is it time for Asian banks to go global?
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Is it time for Asian banks to go global?

As Asia’s share of world GDP and global capital increases, the trend among Asia-based banks is for regional rather than global expansion. The region’s leading chief executives explain their approach to growth.


Asia’s demographic numbers have long been dizzying, especially the projections of where they are going. The Asian Development Bank expects a six fold increase in per capita income in purchasing power parity terms by 2050, by which time the continent will account for 52% of global GDP. By then there will be three billion more affluent Asians looking for banking services.

Foreign banks have sought to gain exposure to Asia for a century, but what about the other way around? For the moment, the penetration of banks from the region into the rest of the world is mainly limited to representative offices. State Bank of India has 190 foreign offices in 36 countries, but since they all handle India-related business, can you really think of it as a global bank?

Acquisition is ad hoc: ICBC buying South Africa’s Standard Bank, MUFG’s crisis-era stake in Morgan Stanley, the international aspirations of Nomura, Macquarie and (through CLSA) Citic Securities. HSBC and Standard Chartered are perhaps spiritually Asian institutions, but both are legally headquartered in the UK.

Instead, the imperative of leading banks in Asia has been to conquer their own region – and there are logical reasons for this. Asia is now one third of global GDP – 33.85%, according to the World Bank, including Japan but not Australia.

“It’s not a small piece of pie,” says Piyush Gupta, chief executive of DBS in Singapore, one of the most expansive of Asian banks. “And it’s growing at 6%. Why would I allocate capital to the other two thirds growing at 1.5%?

“It’s not as if we have run out of opportunity in our backyard. This is the fastest growing economy, there is a big Chinese diaspora we understand, an Asian culture we know how to deal with – why would I not play to my strengths?”


One bank with particularly strong ambitions internationally is Taiwan’s CTBC, formerly Chinatrust. Driven by the paucity of profits available in overbanked Taiwan, the bank has been growing internationally since the 1990s. Overseas revenues represented 38% of profit in 2018; the target is to get to 45% by 2021. When will it reach 50%?

“Probably five years from now,” says president Daniel Wu in Taipei.

Much of this expansion has been in southeast Asia, including the acquisition of 35.6% of Thailand’s LH Financial in 2017. More surprising was the 2014 acquisition of Tokyo Star Bank.

“The first time in Japanese history a foreign bank has taken over a local bank,” says Wu.

There is a reason for that. Asian banks haven’t normally seen much scope for growth in a country with some of the worst demographic prospects in the world. Net interest margins domestically in Japan are just as bad as they are in Taiwan, but CTBC has another angle: bringing Japanese clients into the bank’s Asian network.

“We are able to serve some of the needs of Japanese clients overseas,” he says. “Lots of the small regional banks in Japan don’t have an overseas platform and normally they sign an MoU [memorandum of understanding] with a local bank. But we have signed 30 MoUs with Japanese local banks to serve their clients overseas. It’s a very interesting phenomenon.”

It’s not as if we have run out of opportunity in our backyard. This is the fastest growing economy, there is a big Chinese diaspora we understand, an Asian culture we know how to deal with – why would I not play to my strengths? - Piyush Gupta, DBS

But don’t the big three Japanese banks, MUFG in particular, have that covered? Wu says that, for example, Japan has around 2,500 manufacturers active in Thailand, but only 40% of them are served by the big three: “They are clients of the regional banks. Look at Toyota: it is not from one of the major cities [in fact Aichi].”

And there is another angle.

“When the Japanese regional banks want to serve their clients overseas, they don’t want to refer those clients to the three megabanks, because they would never come back. That is the key,” says Wu.

Other angles include bringing dollar loan bookings and a wealth management model similar to Taiwan.

“The focus is: we pick the niche markets to play in,” says Wu.

The acquisition in Thailand is partly about the same trade corridor, but it is also to help Taiwanese manufacturers in Thailand. Also, it is another place where wealth management looks like it does in Taiwan: mutual funds, structured notes and insurance. The plan is to move to majority control in the bank and Wu says the major shareholder today has indicated it will permit CTBC to do so if results are good.

CTBC is distinctive in that it is not just looking at Asia – it has subsidiaries in the US and Canada, as well as Indonesia, the Philippines and Japan – the biggest focus now is China.


Gupta talks about three transformations at DBS, one of which hasn’t happened yet. The first was to become the biggest bank in Singapore and to make it a credible Asian bank, which it became largely through acquisition. The second was its digital transformation.

“But to me, the third transformation is about our weakness: we are still 80% Singapore and Hong Kong. From day one, there has been this thing: how do I lead a bank that is sustainable over 50, 100 years? To do it, I need to have some depth outside these two city states.

“So this whole thing about Indonesia or India or China, to have a legitimate franchise that creates a DBS runway for the next 20 years, we still haven’t achieved that.”

However, that doesn’t mean taking on the world.

“I think global banking is more and more challenging,” Gupta says. One reason is that the regional context is different in each: a Latin American business is different to one in Europe and different again to Asia: “So it’s not that straightforward to run a large multi-country thing.”

He speaks of the “inefficiencies of scale: if you have 60 countries, 80, 90, even if they are small countries, it will take a lot of bandwidth and systems.”

Piyush Gupta, DBS

This idea of inefficiency of scale also applies to governance. He points out that most of the fines in the banking industry have gone to the biggest players, “because it’s hard to keep on top of everything.”

He recalls HSBC’s Stuart Gulliver saying it was impossible to be aware of everything happening in the bank: “But I sympathize. There are 300,000 people: you’ve got one bad egg sitting in Mexico, how would you know what that person is doing?

“I believe one of our competitive advantages is that we are 26,000 people and half-a-dozen countries. We can be nimble and move the ship and I have a fairly good sense.”

In theory, a successful digibank could be rolled out elsewhere in the world.

“But we’re not there yet,” says Gupta. “We haven’t even proved to ourselves that we can do it in the markets that we want to, let alone take it to western Europe.”

Gupta expects the dominance of US investment banks to remain intact, underpinned by their domestic market, “the only place in the world where you can still charge 3% for underwriting equity.”

But he does expect to see “the rise of the regional and domestic banks. The competition will come from larger domestic and regional banks in their own territories.”


UOB has long believed in a southeast Asia footprint and is now seeking to expand regionally through a digital bank. But it is not doing so lightly.

“Obviously the opportunity is there, but the potential of being downgraded is quite real,” says Wee Ee Cheong, chief executive at UOB in Singapore. “So how to capture the opportunity and yet maintain a double-A rating – this is a challenge.”

Digital banks notwithstanding, expansion comes with another compromise: capital. UOB is locally incorporated in every country in the region in which it is present – Malaysia, Thailand, Indonesia and China.

“They want us to be locally incorporated because they want us to put aside capital,” says Wee. “They want to ring fence our assets and liabilities, because the last thing they want is for any foreign bank to come to the country, take the deposits and the money flows out of the country.”

Within the parameters of individual country requirements, UOB generally puts in as little capital as necessary – enough to do business and to have an appropriate local balance sheet to insulate against depreciation in local currencies.

“We are generally quite cautious and measured in how much we put into one country,” Wee says. “You have to put in enough to generate business and to attract good quality customers. We want to connect the dots for big companies who want to go overseas.”

Much of UOB’s experience over the years has been through acquisition; getting to 100% ownership in each of the big countries UOB operates in has taken time.

“We deal with some minority shareholders because it is important to learn,” says Wee. “If I go to Thailand, I can’t speak a word of Thai, I can’t even pronounce the name of the street, so how do you expect me to run the local operations?”

UOB is uncommonly patient in this respect. Wee says the two Thai banks UOB bought took 16 years to gain traction. Now they are merged and 100% owned within the UOB group. It is only now that they are all on the same centralized technology platform, an effort Wee estimates has cost at least half a billion dollars and taken eight to 10 years.

“I want to create a seamless experience,” he says.

“I want to create the stickiness,” he adds. “If someone only banks with me in Singapore, it is very easy for DBS to say to them: ‘Come to us.’ Their cost of funds is low and they have the government supporting them. In Singapore the relationship can be exited pretty fast.

“But if you also bank with me in Malaysia and Thailand, for you to exit the relationship is very difficult. It is like a husband and wife: if you are married with no children, it is easy to get divorced. Once you have children, you’ve got to think very hard.”

UOB is also in Myanmar, but considers it early days. It has steered clear of the Philippines, arguing there is hardly any flow with the rest of southeast Asia and that the culture is different. It won’t attempt India. “No,” says Wee. “Totally different culture.”

But Wee does have ambition. “I hope I can be a truly Asian bank,” he says.

At the moment about 60% of profit is generated in Singapore and 52% of the group loan base is there, as of the end of 2018.

“We are slowly moving up,” he says. “You have to do it in a measured way.”


CIMB has long been one of the most expansive Malaysian banks, although it has undergone consolidation in the last few years, involving closing a host of businesses from Australian investment banking to Thai credit cards and Indonesian microfinance. Nevertheless, it is now represented in all 10 Asean markets.

The bank’s new Forward23 plan gives a clear picture of how it wants to grow. For an Asean bank, it will remain very top-heavy – and by design. Malaysia and Indonesia are intended to contribute over 80% of incremental value in the next five years, with 1.5 times market growth required in Malaysia, and 2.5 times profit before tax growth expected in Indonesia.

“Our focus will be on those two markets because of their size,” says Zafrul Aziz, group chief executive of CIMB. Indonesia today is about 21% of profit before tax, well down on a previous high of 30% around five years ago; by 2023 he wants it to be 35%. Thailand, Cambodia and Singapore will each contribute about 5% – slightly lower than today, because “we are expecting Malaysia and Indonesia to grow faster, so they have to grow as fast to remain where they are today.”

A digital bank offer in the Philippines and Vietnam will be experimental.

The level of dominance of two markets in a regional business causes Euromoney to ask how regional it really is. Is the symbolism of being everywhere in Asean important or is there a true commercial imperative?

Zafrul says that the long-term plan, outside Malaysia, involves three key revenue pools, not one, with Vietnam and the Philippines joining Indonesia. But those are long-term goals, beyond the 2023 plan. “But we need to start investing today.”

Secondly, he says: “Our transaction banking and trade finance business is also dependent on that network. Trade finance and cash management are key drivers for growth.”

That makes true representation across the region a necessity for corporate clients, whether they are from Malaysia, Indonesia or Thailand.

And what about the idea of Asean?

“The thesis is that the Asean population of 650 million, with a GDP of $1.3 trillion, offers great growth,” says Zafrul. “But the growth in countries varies a lot, and a lot of issues are dependent on politics within countries, such as mobility of labour.

“If Asean does integrate better, the synergies will be there and we will definitely be in a strong position to leverage it. But that’s why I say it is a thesis: I don’t see it happening yet and Forward23 does not assume a high level of integration between Asean countries.”

Public Bank in Malaysia is also a believer in Asean. In 2016, it took 100% control of its joint venture bank in Vietnam and today has 18 branches there. It operates 31 in Cambodia.

“I continue to see great potential in Asean,” says the bank’s founder, Teh Hong Piow.

Generally Indonesian banks have been reticent to grow internationally, which is natural, given the scale of the domestic opportunity. Bank Mandiri had a plan to enter Asean, but when Kartika Wirjoatmodjo took over as chief executive he had different priorities: reducing non-performing loans and “focusing on making the bank healthy again.”

The challenge is finding the right bank. You don’t want to enter without a strong partner locally - Kartika Wirjoatmodjo, Bank Mandiri

With that done, he says, “we start to see opportunity.” He says the bank has $2.5 billion in excess capital for acquisition and is looking both domestically and internationally.

“For international, there is no particular thing we are aiming at,” he says. “We have been scanning the market in the Philippines and Vietnam, particularly the Philippines. We see the mass market is not well developed yet.”

They present good opportunities in Mandiri’s preferred consumer space, he says, with large populations, no saturation in the market and ample room for credit growth. Mandiri has had negotiations about acquisitions in the past, but they have not progressed; it will look again this year.

“The challenge is finding the right bank,” says Wirjoatmodjo. “You don’t want to enter without a strong partner locally.”

Not every bank wants to go overseas, however. One with a strident insistence on staying where it is Bank Central Asia in Indonesia.

This is partly because of what’s available right there.

“The Indonesian market is very lucrative and promising,” says president director Jahja Setiaatmadja. The country has undergone changes in regulation, infrastructure, democracy and financial system, he says. “These changes are for the better.”

He presents the reasons for staying partly as a matter of national duty: “As the children of the nation, we are here to be an essential part of this change and are committed to continue to support the transformation towards a better, stronger and more advanced Indonesia. We remain committed to strengthen our national identity.”

But there are more practical reasons too. He understands banks should follow trade with Indonesia, whether that takes you to China, Japan or Korea, but he believes they should do it through partnership rather than expansion.

“Better to make alliances with them instead of fighting or competing with them,” he says.

At BDO Unibank, president and chief executive Nestor Tan says the bank’s international plans are “quite limited and focused. I think our ambitions would be limited to cross-border transactions where one side is the Philippines.”

The largest international angle to the bank today, as with many Philippine banks, is remittance flows, where the Philippines is the receiver.

Many other banks – among them CIMB and Mandiri – identify the Philippines as a target market, typically the consumer segment and usually through digital. Does that worry Tan?

“It does, but I think the markets are not ready for it,” he says. “Digital depends on market acceptance. So the challenge for any institution is not to get too far ahead of it.”

Better, he says, to be “a fast follower.” And for foreign banks, he says it will be vital for them to have very senior credit officers and compliance officers on the ground: “We have a different environment here.”


Some banks, like Kotak Mahindra in India, open themselves to international opportunities while accepting that the main game is at home. Chief executive and founder Uday Kotak thinks of a matrix of four things: Indian product for Indian consumer, Indian product for global consumer, global product for Indian consumer and global product for global consumer.

Obviously it is active in the first; in the second, it provides institutional equities and investment banking for global clients; in the third, it uses partnerships.

“We think the Indian opportunity is large enough for us at this stage not to go to that fourth item in the matrix,” he says. “But there will come a time when we have to think about that as well.”

More broadly, Kotak does think that Asia is playing a more important role in global finance: “However we should not get carried away in our presumption of how large that role will be. As long as the key nostro account is the US dollar account, we have got to keep that reality in mind.”

Is that partly because of the lack of convertibility of the rupee internationally?

“I’m not saying the rupee needs to be freely convertible globally, but the fact of the matter is even today the largest part of global trade is the US dollar. And we have to be real about it. Therefore, the ability of Asian finance to be truly global is when more and more Asian financial currencies of large countries like China and India become global currencies.”

In its early days Kotak Mahindra learned about the world through a joint venture with Goldman Sachs.

“I think we were very, very raw in terms of knowing how the rest of the world worked,” he says. “We were a little bit like the frog in the well.”

Partnership with Goldman taught it about global markets; eventually Kotak Mahindra bought out the stake. Today, it operates internationally through partnerships with SMBC (a major shareholder) and ING, which sold down its stake in March but is still a partner.

What about Citic Securities/CLSA in the aftermath of chief executive Jonathan Slone and chairman Tang Zhenyi’s departures? The mood in Hong Kong following the departures suggests the experiment is struggling. There are rumours about strategic differences and slashed bonus pools; a farewell note from Tang to his staff, subsequently seen by Reuters, told its own story.

“Along the way toward more success, although I hate to admit, things were not developing totally the way I expected,” he wrote. “I came to CLSA two years ago with dream and ambition. But due to all kind of complexities, I suddenly found out, with great pain, that I myself had become a black, or even a negative asset, on the path for CLSA’s further growth.”

Nevertheless, the very existence of the partnership is a landmark. It represents a mainland Chinese securities house buying what looks like a western business (in that CLSA was created in Hong Kong by westerners bringing an international approach to Asia Pacific brokerage and investment banking) to use it as a bridgehead to take on the world. The jury is still out on whether or not it will work.

The other big Chinese banks all own large investment banking subsidiaries in Hong Kong – including Bank of China International, ICBC Asia and China Construction Bank (Asia) – but, along with pure-play investment banks like CICC, their international aspirations are mainly about Chinese issuers and capital in international markets.

Chinese banks, however, are the ones most likely to take on the world, a function of the expansive nature of their corporations and, more recently, the Belt and Road Initiative.

“Internationalization is one of our bank’s earliest strategies,” says Wu Wei, executive vice-president and chief financial officer at Bank of Communications. “It’s older than the Belt and Road Initiative raised by our government.”

The strategy, Wu says, involves serving Chinese corporate customers going global and foreign investors investing in mainland China.

That doesn’t mean blindly following BRI. Asked about the bank’s comfort about going into, say, Sri Lanka or Pakistan, Wu says: “We do internal reviews for those countries and we can say we are now not able to set up there, because we lack staff there and there are no staff of our bank who are willing to go there. For us it is not viable to set up institutions in those markets.”

Also, he says, the regulator will review the sovereign risk of any market in which the bank wants to set up. “Another great concern of setting up institutions there is that the local governments might lack some transparency,” says Wu. “It’s not like in China where we are making progress both in opening up and in anti-corruption.”

Would a bank like Bank of Communications buy a global bank? “For now, in terms of the capital position, I think we are able to do so,” Wu says. “But it’s rather difficult to find the proper institution that we can acquire.”

The bank has already acquired in Brazil. “But if we want to go for some bigger targets, we should consider our own capability.”

Regulation impedes the idea too. The Committee on Foreign Investment in the United States is a big factor and not just for the idea of acquiring US banks but any bank with US interests.

“I think for us, now, it’s best to set up our own branches in overseas markets,” says Wu. The latest ones were in Prague and Toronto.

But it is not easy for a Chinese bank to go global; few know this better than Sun Yu, executive vice-president of Bank of China and formerly responsible for operations in the UK.

“Maintaining and developing our culture, as a Chinese bank with a strong international presence, is a challenge and one we work hard on to get right,” he says. “As general manager of the UK branch for a number of years, I witnessed this first-hand.”

He hired a number of people from the City while there. “Some hires were successful, others less so,” he says.

To better serve local clients, he says, the bank needed to hire local talent. “But in the UK we made it very clear we were a Chinese bank based in the City, different from banks like Barclays or RBS,” he says. For some, the Bank of China story was very appealing: commodities bankers wanting to get access to the resources of a Chinese bank, for example. Today the bank has 28 nationalities working in that office.

The challenges won’t stop it trying.

“Bank of China’s DNA from the outset has been to look internationally,” he says. “This is part of our heritage.”

Bank of China is the most international of all Chinese banks, operating in close to 60 countries, with 25% of both assets and revenues overseas.

“Is this a pivotal moment for the internationalization of China’s economy?” asks Sun. “It could well be. As the Chinese capital market opens up, and new financial institutions come to participate in onshore markets, the opportunity is there. Real demand for the renminbi will increase.”

There is £8 trillion of assets under management in London, he says; less than 1% of that is invested in renminbi. As the currency grows overseas, perhaps that is what will make Chinese banks into the global forces they are threatening to be.

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