Banks in Southeast Asia More Upbeat than North Asia
(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.
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