In an interview with Global Finance, Andrew Géczy, ANZ’s CEO of international and institutional banking (IIB), talked about Asia’s remarkable growth—and why the region’s financial system will likely overtake the combined US and European markets by 2030.
Global Finance: What are the opportunities right now for Asian banks?
Andrew Géczy: Asia remains an area of strong economic growth relative to other parts of the world, and there are many opportunities for the region’s banks. China’s growth has deliberately slowed, but it will continue to contribute about a third of global growth. We also expect Asean will emerge as an increasingly important location in global manufacturing and trade.
Banks will benefit from the rapid emergence of a new consumer class in coming decades, with Asia-Pacific expected to account for two-thirds of middle class consumption by 2030, compared with one-third today. The liberalization of the Asian financial system will also have a profound impact, fueling the development of regional capital and investment markets. We estimate the Asian financial system will be bigger than the US and Europe combined by 2030.
GF: And the difficulties facing banks in the region?
Géczy: Regulation and bank capitalization rules are among the challenges—although these are already leading global banks to reduce their footprint in the region, thereby creating opportunities for local players. Asian banks can play a significant role in the emergence of the renminbi as a global currency—the renminbi will likely dominate in Asia because of the size of the Chinese economy. Not all Asian banks, however, will have the scale or be willing to make the investment to participate in this development.
Asian connectivity is a source of competitive advantage for ANZ in all of our markets.
GF: What does this retrenchment by some European and US banks in the region mean for Asian financial services companies?
Géczy: The trend is opening up opportunities for Asian banks to acquire assets and market share in retail and commercial and institutional banking. Intraregional trade is increasing rapidly, along with the size of the consumer class, creating new opportunities to support trade and wealth flows. As the Asian financial system develops, we expect that regional capital markets will expand dramatically. Asian banks with global markets expertise and a strong geographic footprint clearly stand to benefit from the dynamic and from a reduced number of meaningful competitors.
GF: How important is creating the right digital platform for your clients? And how close are you to achieving this?
Géczy: Clients are increasingly looking for our services to be delivered digitally, and they expect intuitive, mobile solutions that are continuously available. To thrive in this world, banks must recognize and deliver what consumers are demanding. Digital payments are the leading edge of banking disruption, and banks need to be able to provide seamless, personalized experiences for banking and wealth management.
The increased competition from nonfinancial services companies will only benefit consumers as the race intensifies to deliver new customer-centric innovations. However, we don’t look at this in terms of a platform as in the core systems of the past. We need to be able to develop new technology-driven services quickly. From our own point of view, we are focused on accelerating ANZ’s digital transformation to drive growth in Australia and New Zealand, to build scale in Asia and to deliver a step change in operational efficiency.
GF: How crucial is it that banks manage their capital efficiently in Asia today?
Géczy: Our superregional strategy generates a healthy level of organic capital, and ANZ remains well capitalized. Given recent developments in Basel IV, however, there will be pressure for banks to hold more capital globally, and all banks will need to focus on capital efficiency in every area of their business.