Banks in Southeast Asia More Upbeat than North Asia

Asia-Pacific Quarterly Banking Survey of Top 900 Firms

(Asia) – Banks in Southeast Asia have a more upbeat outlook for capital expenditure, corporate profitability and pricing power than in Northeast Asia over the next three to 12 months, according a research report published this week.

The
Asia-Pacific Quarterly Banking Survey, jointly published by JPMorgan and
East & Partners, is a new quarterly survey of Asia’s top 900 firms by
annual turnover. The report was split between Northeast Asia (China, Hong
Kong, South Korea and Taiwan) and Southeast Asia (Indonesia, Malaysia,
Philippines, Singapore and Thailand). The survey looked at each firm and
their opinions on credit pricing, banking relationships and their future
intentions to borrow.

“The
majority of corporate respondents in Northeast Asia are not planning a boost
in capital expenditure,” said Scott Christensen, Regional Head of Asia
Pacific banking research at JPMorgan. “These firms see a flat to
negative growth in profits going forward and they are not confident about
pricing power. Over one half of the corporates surveyed in Northeast Asia
are not borrowing or extending credit facilities over the next three to 12
months. Moreover, the majority of respondents in Northeast Asia report an
increase in interest rates charged on loans, an increase in spreads over
bank quoted rates and an increase in fees charged by banks.”

Paul Dowling
Principal Director of East & Partners, said “In Southeast Asia we
note a more upbeat outlook for capital expenditure, corporate profitability
and pricing power than Northeast Asia over the coming 12 months. Only one
third of the corporates surveyed in Southeast Asia said they had no
intention to borrow anew over the next 12 months. All other firms have plans
to increase borrowings, or they are unsure. In addition, there is a bias in
favour of capital expenditure and new projects. Unlike in Northeast Asia,
the majority of respondents did not cite any increase in interest rates or
loan spreads, though there has been a broad increase in loan-related fees.
The survey responses have led us to conclude that there are significantly
fewer concerns about credit quality at banks in Southeast Asia than
Northeast Asia.”

The survey
also highlighted a re-focusing on the importance of transaction services
across both geographical areas, a factor clearly influencing the level of
interest and participation from CFOs and Group Treasurers in this research
program, and the resulting quality of its analysis.

HSBC
continues to lead the market, with just over one fifth of Asia’s top 900
corporates holding their principle transacting banking relationship with the
bank.

“Although
there is some distance between HSBC and Standard Chartered, the gap is
closing slightly as a result of StanChart’s comparatively strong performance
in customer satisfaction amongst its primary corporate account base,”
said Mr. Christensen.

Third ranked
and a growing service provider in terms of share of relationships is
Citibank, with there being some distance further to a brace of US and
Singaporean banks. The Bank of China, which has relatively poor, although
improving, performance in customer satisfaction, is making some ground in
market share, moving up from five per cent to 5.2 per cent of primary
transaction banking relationships in the last six months. Notably, given the
strong shifts to back office centralization in transaction banking
generally, local branch network coverage remains a key, albeit diminishing
area of performance improvement for banks in the eyes of CFOs, who continue
to demand direct, authority-based contact.

For further
information: