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Global banking outlook 2012-2013 - Asia-Pacific - EY - Global

Global banking outlook 2012-2013

Asia-Pacific

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The potential of the Indian market makes it extremely attractive for international banks but, given the challenges that remain, the benefits of investment may only be realized over a longer-term period.

Japan

Following the earthquake and tsunami in March 2011, the supply chain has now recovered and reconstruction is underway.

Unfortunately, the good news will be somewhat offset by the yen’s appreciation and the ongoing Eurozone crisis, both of which will be problematic for manufacturers looking to export.

Both Japanese corporations and the banks that support them will continue to look abroad in search of growth, Those looking abroad will be well-placed to take advantage of asset and business sales by stressed European banks. Their primary focus is likely to remain on Australia, Brazil and the Asia-Pacific rapid-growth economies.

Additionally, although the Japanese banks emerged relatively unscathed from the global financial crisis, the country is home to three of the G-SIFIS and the government has signed up to implement the G20’s new global regulatory standards. Large banks in Japan will be grappling with a range of reforms, including Basel implementation, resolution planning and OTC derivatives.


Japan 2009 2010 2011* 2012 forecast 2013 forecast
        Feb 2011 Feb 2012 Feb 2011 Feb 2012
Real GDP growth -5.5 4.5 -1.0 2.0 1.3 2.0 2,9
Policy interest rate 0.1 0.1 0.1 0.7 0.1 1.6 0.5
Unemployment rate 5.1 5.1 4.6 4.9 4.3 4.2 4.3
Inflation -1.3 -0.7 -0.3 0.5 0.1 0.6 0.8

* Latest estimates used where final figures not yet available. Forecasts for 2012 and 2013 made in February 2011 and February 2012. Source: Oxford Economics


Australia

Driven by limited home market opportunities, most Australian banks will continue to look at international expansion for the next phase of growth. “Local” rapid-growth economies will be a particular focus despite restrictions on foreign ownership and a limited supply of potential joint-venture partners, which will continue to pose challenges for expansion.

Regulatory issues are also prominent, with both global (Basel III, FATCA and resolution planning) and local (Future of Financial Advice) reforms. The Australian Prudential Regulation Authority is forerunning Basel III timelines, which will provide major banks some challenges meeting the liquidity and leverage ratios,


Australia 2009 2010 2011* 2012 forecast 2013 forecast
        Feb 2011 Feb 2012 Feb 2011 Feb 2012
Real GDP growth 1.4 2.6 1.9 4.2 3.1 3.4 3.9
Policy interest rate 3.3 4.4. 4.7 5.6 3.9 5.1 4.4
Unemployment rate 5.6 5.2 5.1 4.8 5.5 5.0 5.1
Inflation 1.8 2.8 3.5 2.5 2.0 2.5 2.7

* Latest estimates used where final figures not yet available. Forecasts for 2012 and 2013 made in February 2011 and February 2012. Source: Oxford Economics


China

The Chinese growth story continues, though the juggernaut has shown some signs of slowing as a result of events in the US and Europe.

The banks remain well-capitalized by international standards and, over the short-to-medium term, they will continue to diversity their loan portfolios to reduce the concentration risk on real estate and increase focus on entrepreneurs. Opportunities will emerge in corporate as well as in the burgeoning investment banking sector.


China 2009 2010 2011* 2012 forecast 2013 forecast
        Feb 2011 Feb 2012 Feb 2011 Feb 2012
Real GDP growth 9.2 10.4 9.2 9.0 8.4 8.8 8.8
Policy interest rate 1.8 1.8 2.3 4.2 2.3 3.7 2.6
Unemployment rate 4.3 4.2 4.1 4.2 4.0 4.1 4.0
Inflation -0.7 3.3 5.4 2.9 2.9 3.0 3.0

* Latest estimates used where final figures not yet available. Forecasts for 2012 and 2013 made in February 2011 and February 2012. Source: Oxford Economics


India

The potential of the Indian market makes it extremely attractive for international banks but, given the challenges that remain, the benefits of investment may only be realized over a longer-term period.

At the top of the regulatory agenda, anti-corruption legislation should benefit public sentiment and business conditions. The government has also relaxed the rules to allow foreigners to invest directly in Indian equity markets, which should increase the availability of funds for investments — though businesses borrowing abroad will suffer if the currency continues to depreciate.

The Reserve Bank of India mandate on financial inclusion will continue to drive innovative low-cost services in rural markets and banking using mobile devices will expand further and faster here than in many developed markets. In business banking, too, mobile banking technology will be used to improve service delivery and access to transaction data.


India 2009 2010 2011* 2012 forecast 2013 forecast
        Feb 2011 Feb 2012 Feb 2011 Feb 2012
Real GDP growth 7.0 8.7 7.1 9.0 6.5 8.8 8.7
Policy interest rate 4.8 5.6 7.8 7.5 8.3 7.5 7.6
Unemployment rate 8.0 8.0 8.0 8.0 8.0 8.0 8.0
Inflation 10.2 12.0 8.9 4.8 6.6 4.8 4.8

* Latest estimates used where final figures not yet available. Forecasts for 2012 and 2013 made in February 2011 and February 2012. Source: Oxford Economics


Indonesia

Although Indonesia has been somewhat affected by issues in Europe and the US, GDP growth has remained strong and Indonesia’s debt returned to investment grade status for the first time in 14 years. Yet, economic and political risks remain.

The primary trends driving growth opportunities include:

  • The continued growth of Indonesia’s middle class and the increasing proliferation of smartphones will create new opportunities for consumer banking products. Since they will be delivered via mobile technology, the requirement for an extensive and costly branch infrastructure will be eliminated.
  • The Sharia-compliant banking products will be a growth opportunity as the Muslim sector of the population grows richer.

Indonesia 2009 2010 2011* 2012 forecast 2013 forecast
        Feb 2011 Feb 2012 Feb 2011 Feb 2012
Real GDP growth 4.6 6.2 6.5 6.5 6.2 6.5 6.7
Policy interest rate 6.9 6.5 6.6 7.5 6.2 7.5 7.3
Unemployment rate 7.9 7.1 6.3 5.9 5.9 5.4 5.4
Inflation 4.8 5.1 5.4 5.4 4.6 5.3 5.1

* Latest estimates used where final figures not yet available. Forecasts for 2012 and 2013 made in February 2011 and February 2012. Source: Oxford Economics




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Steven Lewis, Global Banking & Capital Markets Lead Analyst analyzes the primary issues and banking industry trends to help institutions forge ahead in this video series.

Global banking outlook 2012-2013

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  • Steven Lewis
    Global Banking & Capital Markets Lead Analyst
    Ernst & Young LLP

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