(10 April 2017 – Asia) Last week, ANZ Banking Group’s head of institutional business, Mark Whelan said regional trade tensions will not greatly impact the bank, despite its renewed focus on serving large corporates operating in Asia.
“There has been a slowdown in trade already, and you’ve got to take into your thinking that there might be further disruption,” Whelan said, prior to the conclusion of the Florida summit, which brought together Chinese President Xi Jinping and US President Donald Trump.
“Yes there will be tensions. Will these tensions affect Australia and New Zealand, and our business? Yes to a degree, but 50 percent of Australia’s trade is with China, South Korea and Japan, and when you add in the rest of the region, that figure gets to 83 per cent, so I think it is important to take a step back and not get too hysterical,” he added.
“The Regional Comprehensive Economic Partnership (RCEP) and bilateral trade agreements will also step up,” he added.
Farhan Faruqui, head of ANZ’s international institutional business based in Hong Kong added: “The belt and road scheme is still playing out and it’s too early for us to say what our involvement will be, but our view is that we have clients in many of those countries and we will support our clients in areas where it makes sense for us to add value.”
ANZ’s strategy has shifted back to focussing on institutional banking in Asia, from high levels of expansion under previous CEO, Mike Smith.
“After the global financial crisis there were regulatory changes and changes in competition, and our ability to get to decent return on equity out of retail and wealth in Asia was very difficult,” said Whelan.
“Our strategy is a little bit back to the future; it is not that different from what we were doing here 10 years ago,” said Whelan. “We don’t want to be a big player in mergers and acquisitions or equities, so we aren’t competing with the big banks in this area, and we aren’t trying to be a great African or South American Bank,” he said
Faruqui added: “We want to provide our clients with five key products,” he said, referring to loans, debt capital markets, trade, cash management, and foreign exchange and rates.
“That’s our business, and we do it in sectors and markets that make sense for us. It’s all about focus.”
East & Partners Asia’s Trade Finance Report, which interviews the top 1000 corporates across Asia (excluding Japan), has found that the bank’s share of primary trade finance relationships in the region has dipped by 8 percent since 2014.
In addition, the report showed that ANZ’s primary trade finance wallet share has dropped by 20 percent over the same period, compared to 3.75 percent for the top four providers, which includes HSBC, Citigroup, Standard Chartered and DBS.
“Pricing aside, to win trade customers, banks need to invest in Knowledgeable Relationship Managers and offer competitive Trade Loan Facilities and Conditions,” said Amit Alok, Asia Business Head at East & Partners.
Market satisfaction has improved marginally overall but the three service factors where all banks still have work to do, according to the research results, are Value for Money, Trade Credit Process and Full Supply Chain Financing.
“These are consistent with increased competition as evidenced by increased pitching activity by the banks and raised expectations in the market as new technology and ‘Disruptors’ such as Non-Banking Financial Institutions (NBFIs) and Fintechs enter the market,” he said.
ANZ has largely pared back its Asia operations, selling its retail banking and wealth management businesses in five markets, while its retail business in the Philippines and Vietnam remain under review.
Additionally, it offloaded its 20 percent share of Shanghai Rural Commercial Bank. While it still has interest in Bank of Tianjin, P.T. Bank Pan Indonesia and AMMB Holdings in Malaysia, it is seeking out bidders for those also.