By Thomas Clouse, Jonathan Gregson, Antonio Guerrero & Gordon Platt
REGIONAL ECONOMY ON SOLID GROWTH PATH
Asia’s regional economy continues to grow steadily, despite the tepid recovery in the United States and sovereign debt issues in Europe. The region’s banks, like the economies in which they operate, are performing better than most Western counterparts. The region has become increasingly interdependent and financially integrated, and several banks—especially those from developed markets such as Japan, Singapore and Australia—are capitalizing on those closer ties to build business within and beyond their national borders. China’s big banks are still growing, albeit more slowly, after government lending quotas, real estate restrictions and tighter interest rate margins cut into their profits. Some of the region’s economic buzz has drifted south from China to Southeast Asia, with countries such as the Philippines and Indonesia posting strong economic growth and solid banking growth. In South Korea intense competition and slow economic development have tightened liquidity and margins for the country’s banks, while loan quality issues in India and Vietnam are undermining confidence in their respective financial systems. Through much of Central Asia, banks are carefully weighing their growth strategies against political and asset quality risks.
As a global bank, HSBC is facing challenging times—with regulatory fines, negative media attention and heavy losses in European markets. Behind the headlines, however, the bank’s commercial division had a record-breaking year in 2012, led by its performance in Asia. The commercial division posted a record profit of $8.5 billion, up 7.5% from 2011. Overall net profit for 2012 dropped 6% to $20.6 billion, with the bank taking a $5.2 billion hit after revaluing its own debt. Of that profit, however, $18 billion came from Asia, up 36% from the previous year.
HSBC has cut costs and streamlined operations in recent years, selling off or closing more than 47 businesses or noncore investments since the beginning of 2011. The bank has reduced staff and will likely continue to do so in coming months. The controversial cost-cutting program also involves a shift in focus to Asian markets, a strategy that may pay off if the bank is able to repeat its regional performance in coming years.
Peter Wong, CEO of HSBC Asia-Pacific / www.hsbc.com
Ameriabank’s strategy focuses on its extensive trade finance services. The bank doubled its financial leasing business, tripled its international transfers volume and quintupled its factoring business in 2012. In December, Ameriabank opened a representative office in the US state of California, a first among Armenian banks. Domestically, Ameriabank boasts the country’s largest corporate loan portfolio and retail deposit base. Its overall profits increased 52% last year. In coming months the bank plans to expand its credit card options and establish a client claim center to improve service quality.
Artak Hanesyan, chairperson of the management board—general director / www.ameriabank.am
ANZ is growing domestically while continuing to push its international expansion. The bank increased customer deposits and profit by 10% and 6%, respectively, in fiscal 2012, which ended in September, while deriving 21% of its revenue from outside Australia and New Zealand. The bank also launched a five-year, A$1.5 billion ($1.6 billion) “Banking on Australia” project, which seeks to improve customer service, expand service options and lower costs. ANZ is the only Australian bank incorporated in China, opening its sixth branch there in March. It also opened its first Malaysia branch last year and received approval to open a representative office in Myanmar.
Michael Smith, CEO / www.anz.com
AccessBank has leveraged its expertise in small business lending to become one of Azerbaijan’s most successful banks. It expanded its lending portfolio by 39% in 2012, with small-business and agricultural loans accounting for the lion’s share. Despite rapid growth, Accessbank maintained quality lending. The bank also introduced credit-card, mortgage-loan and third-party insurance products in 2012. The quality lending and product additions boosted pretax profit by 13.6% in 2012.
Michael Hoffmann, CEO / www.accessbank.az
Bangladeshi banks have struggled over the past year as liquidity tightened amid increased government borrowing and stricter monetary policy. As profits dropped drastically at most of its competitors, Prime Bank continued to perform well, with its pre-provision profit rising 8.6% and total assets up 18.5% annually. This year the bank is launching the country’s first biometric smart card offering secure banking services based on fingerprint identification.
Md. Shirajul Islam Mollah, chairperson / www.primebank.com.bd
Bank Islam Brunei Darussalam
The economy of the small country of Brunei Darussalam decelerated last year as oil and gas output slowed. Despite the lower growth rate, Bank Islam Brunei Darussalam improved its delinquent loan ratio from 5.7% to 4.3% while increasing its market share in the corporate and manufacturing sectors. It is taking advantage of Brunei’s high mobile-phone penetration rate with its mobile banking platform, introduced last year, launched a new credit-card rewards program and revamped its customer call center. Its investment banking unit arranged several financing projects in 2012, including a $170 million dollar syndicated deal for Brunei Gas Carriers.
Javed Ahmad, managing director / www.bibd.com.bn
Much of Acleda Bank’s success stems from its innovative approaches to reaching the country’s underbanked populations. Last year it introduced mobile-only bank accounts, allowing customers to pay bills, conduct person-to-person payments and buy phone credit using their mobile phones. Through these accounts customers can also deposit and withdraw money through bank offices and ATMs. The bank recently opened its first office in Myanmar and signed an agreement to cooperate with Japanese bank Sumitomo Mitsui Banking Corporation. As a result of its efforts, Acleda’s 2012 profit rose to $66 million in 2012, up from $50 million in 2011.
In Channy, CEO and president / www.acledabank.com.kh
Industrial and Commercial Bank of China
While China’s banking boom slowed slightly last year, ICBC continued to perform well. The world’s largest bank by market value, ICBC did not let its size impede its risk management. The bank brought its nonperforming loan (NPL) ratio down from 0.94% to 0.87% and improved capital adequacy while garnering an 11% increase in customer deposits and a 13% bump in net profit. The bank is the country’s largest lead underwriter of bonds and biggest credit card issuer. It is expanding rapidly overseas and recently acquired an 80% stake in Bank of East Asia (USA) and an 80% stake in Standard Bank Argentina.
Yang Kaisheng, vice chair, executive director and president / www.icbc.com.cn
Georgia’s banking industry has cooled somewhat recently, but TBC Bank has kept its assets, deposits and operating profit growing, up 18%, 24% and 21.7%, respectively, in 2012. The bank keeps a careful watch on its loan quality, with an NPL ratio of only 1%, and places strong emphasis on efficiency, producing about twice as many loans per branch as its primary competitors. The bank’s Branch Lean Management Project, completed in December, will further boost this efficiency and improve customer service through specialized training programs. TBC’s microlending climbed 72% last year, following its 2011 acquisition of Constanta Bank.
Vakhtang Butskhrikidze, CEO / www.tbcbank.com.ge
HSBC built on its strong reputation locally to push pretax profits from its Hong Kong operations up more than 30% last year to $7.6 billion. Retail banking and wealth management services were particularly strong contributors, and the bank now ranks in the top five equities brokers in Hong Kong. HSBC was the market leader in Hong Kong dollar issuance and the leading bookrunner for high-yield bonds in Asia, excluding Japan. Hong Kong’s Hang Seng Bank, in which HSBC owns a 62% stake, also posted positive profit growth of 15% last year.
Peter Wong, CEO of HSBC Asia-Pacific / www.hsbc.com.hk
India’s economy has slowed over recent years, and banks are feeling the pressure, with industry profits falling and nonperforming loans rising. HDFC, however, has continued performing well, increasing its profits for the nine months ending December 31 by 24% year-on-year. Its nonperforming loan ratio sits at 0.75%. The bank has recently implemented new software and data storage technologies to improve speed and efficiency. In an October banking stress test, analysts at Fitch Ratings concluded that “HDFC Bank has the strongest profile with the most superior profit buffer among the large Indian banks in the study.”
Aditya Puri, managing director / www.hdfcbank.com
Bank Central Asia
Indonesia’s banks are benefiting from the country’s relatively strong growth, with most of its biggest banks reporting increases in profit and portfolio size. BCA takes a selective approach, focusing on quality rather than quantity. The bank’s profits increased by 8.3% in 2012, a slower rate than some competitors, but the bank’s nonperforming loan rate stood at 0.4%, the lowest among top Indonesian banks. BCA increased mortgage lending by 49.1% in 2012 and boosted its transaction banking business by 19.4%. Its focus on quality and diverse revenue streams will serve BCA well if the economy begins to cool.
Jahja Setiaatmadja, CEO / www.bca.co.id
Sumitomo Mitsui Financial Group
Strong quarterly profits, a stock market rally and a change in central bank leadership have brought optimism for Japan’s banks. Among Japan’s big three international banking groups, Sumitomo posted the highest profits for the nine months ending on December 31, with the group’s net climbing 34% to ¥550 billion ($5.8 billion). It also ranked third globally among project finance arrangers last year. The bank’s consumer finance division, which contributed ¥49 billion to the company’s bottom line over the nine-month period, will expand its presence in China this year.
Koichi Miyata, president / www.smfg.co.jp
Halyk Bank continues to perform best among Kazakhstan’s three largest banks, including Kazkommertsbank and BTA Bank. Halyk is the second largest by assets and the most profitable among these banks. Last year Halyk’s profits rose 77.1% to 70 billion tenge ($464 million) with a 10% increase in lending. This year the bank will focus on reining in overdue loans, which comprise 17% of the total loan portfolio, while fending off competition from small, fast-growing peers.
Umut Shayakhmetova, CEO / www.halykbank.kz
Demir Kyrgyz International Bank
Demir Kyrgyz International Bank had a big year in 2012, with assets, deposits, loans and profits growing by 41%, 45%, 51% and 37%, respectively. Demir controls 45% of the country’s international credit card business, for instance, and conducts 63% of its point-of-sale transaction volume. The bank also boasts strong Internet banking services. Recently, Demir introduced bar code scanning for its business clients and joined with retailers to offer special bargains for customers.
Sevki Sarilar, CEO / www.demirbank.kg
ICBC Macau’s success stems from domestic and international sources. Within Macau the bank offers innovative and widely used e-banking services as well as several credit, debit and cash-card options. ICBC Macau has established a strong point-of-service payment business, with transaction volumes increasing by 99% last year, and leads the market in economic mortgage loans with 70% market share. On the international front, the bank has leveraged its connection to mainland China to become a leading RMB cross-border settlement bank while capitalizing on its Macau location to service clients in other Portuguese-speaking countries.
Shen Xiaoqi, vice chairperson and CEO / www.icbc.com.mo
Maybank is moving quickly into overseas markets while maintaining its industry-leading position at home. The bank set record profits of RMB5.7 billion ($1.8 billion) last year, up 17.6% from 2011, while increasing domestic loans by 11.8% and deriving 30% of its income from overseas markets. It recently opened outlets in Laos and Cambodia and worked on investment projects in Hong Kong, the Philippines and Australia. Maybank now ranks as the third-largest underwriter of Islamic bonds globally. The bank’s investment banking unit tops the country’s ranking for M&A advising.
Abdul Wahid Omar, president and CEO / www.maybank.com
Mongolia’s economy will likely expand by double digits this year after growing by 12.3% last year and 17.3% in 2011. Its banks are benefiting from the rapid growth while struggling to maintain quality in their lending portfolios. Golomt Bank is slowing its rate of expansion to pull quality and safety into sharper focus. The bank’s profits fell slightly last year, but Golomt now has the highest liquidity ratio (41.4%) in the Mongolian banking system, as well as the lowest loan-to-deposit ratio (69.6%).
Ganbold Galsan, CEO / www.golomtbank.com
State-owned Kiwibank has steadily grown its customer base in recent years to become one of New Zealand’s top-performing banks. For the six months ended December 31, the bank’s profit rose 53% year-on-year to NZ$58 billion ($48.6 billion), while its customer deposits expanded by 6%. In the 12 months to June 2012, the bank more than tripled its profits and acquired Gareth Moran Investments. In March, Kiwibank raised $158 million in a sale of Swiss-franc-denominated bonds.
Paul Brock, CEO / www.kiwibank.co.nz
United Bank continues to perform well, despite concerns over Pakistan’s budget deficits and economic stability. The bank’s consolidated net profit rose 30% last year to PKR19.3 billion ($196 million). Noninterest income is an increasingly strong contributor to this growth, having risen 35% to PKR17.1 billion last year. The bank has a larger international presence than most of its competitors and now boasts a leading market share of 22% in the Pakistani remittances business. United Bank is also improving its microfinance services after leading a group of investors in a takeover of microlender Khushhali Bank.
Atif Bokhari, president and CEO / www.ubl.com.pk
Bank of the Philippine Islands
The Bank of the Philippine Islands pushed its 2012 profits up 27% to PHP16.3 billion ($400 million) with a return on assets of 1.9%, ranking highest among the country’s three biggest banks. The growth has not compromised the bank’s loan quality, with the over-90-day NPL ratio at only 1.46%. BPI’s Internet and mobile banking services are growing quickly, with transactions on those channels having increased by 29% and 290%, respectively, last year. The bank recently introduced a smaller format for branch banks, facilitating its geographical expansion. Its increasingly busy investment banking division has underwritten numerous bond and equity offerings.
Cezar Consing, president and CEO / www.bpi.com.ph
Oversea-Chinese Banking Corporation
Singapore boasts three of the world’s most stable banks—DBS, United Overseas Bank and OCBC. Among those, OCBC posted the top profit last year, with income soaring 73% to S$4 billion ($3.2 billion). Much of that profit came from sales of its stakes in other companies, but even without those proceeds, the bank’s underlying profit rose 24%. Beyond the boost to the bottom line, the asset sales will allow OCBC’s leadership to focus on its core banking business. The bank’s noninterest income grew 31% in 2012, with life assurance profit from its subsidiary Great Eastern Holdings jumping by 81%.
Samuel Tsien, CEO / www.ocbc.com
Slow growth and intense competition have tightened liquidity and pulled down profits in South Korea’s banking system in recent months, with few signs of change ahead. In this difficult environment, Shinhan Bank has relied on its retail and small and medium-size enterprise (SME) lending to support its overall banking business. Profits dropped almost 20% last year, but deposits, lending, return-on-equity and Tier 1 capital all increased. In a February report, ratings agency Moody’s wrote: “[Shinhan’s] profitability and asset quality have been more stable—when viewed against its major domestic peers—through domestic downturns, as the bank has a more focused and well-defined strategy.”
Suh Jin-won, CEO and president / www.shinhan.com
Commercial Bank of Ceylon
Commercial Bank of Ceylon is Sri Lanka’s largest private bank by market capitalization, assets and profits. For the past decade the bank has consistently outperformed its competitors, and last year was no exception: Net profit rose by 28.1% to LKR10.1 billion ($79.6 million). The bank upgraded its e-banking platform and set up loan origination software to reduce its cost-to-income ratio to 47%, the lowest among local private banks. The International Finance Corporation, a member of the World Bank Group, announced in February that it would invest $75 million in Combank to develop its SME lending capabilities.
Ravi Dias, CEO and managing director / www.combank.net
CTBC Bank, formerly Chinatrust, is Taiwan’s largest and most profitable bank. Profits rose 9.1% to TWD18.4 billion ($616 million) last year. The bank ranks first in its industry in credit card spending and circulation, Internet and mobile banking customers and interbank ATM transactions, among other measures. CTBC is quickly expanding into overseas markets, launching private banking services in Singapore and Hong Kong last year and opening its first mainland China branch in Shanghai. This year CTBC will open branches in Vietnam, Canada, India and Guangzhou, China. In February the bank sold RMB1 billion in renminbi-denominated bonds, a first among Taiwanese banks.
Wen Long Yen, chairman / www.chinatrust.com.tw
Siam Commercial Bank
Siam Commercial Bank set record profits for the third year in a row last year and is likely to continue the trend in 2013. It boosted net profit by 29% to THB40.2 billion ($1.4 billion), while improving its collection procedures and selling poorly performing loans to bring its NPL ratio down from 2.6% to 2.1%. The bank has Thailand’s largest retail network and lending portfolio, and its automotive loans jumped 46% in 2012. Its fully owned subsidiary, SCB Asset Management, is the second-largest asset management company in the country. This year SCB is upgrading its data management capabilities and customer service channels.
Kannikar Chalitaporn, president / www.scb.co.th
Despite being a relatively small bank, HamkorBank enjoys a reputation for innovation, stemming largely from its robust SME services and successful money transfer business. The bank’s diverse lending portfolio brings stability and high profit margins. The International Finance Corporation owns a 15% stake, with no shareholder owning a majority, resulting in transparent management and reduced moral hazard risk. In a January report, Moody’s wrote: “Compared to its Uzbek peers, HB is favorably positioned in terms of corporate governance and financial transparency.”
Ikrom Ibragimov, chairperson / www.hamkorbank.uz
Inflation and slower growth have cut into profits at Vietnamese banks, with most reporting significant drops. Despite the challenging landscape, VietinBank increased its assets by more than 9% while reducing its profit level by only 24% in 2012. In February the bank boosted its capital base by approving the sale of a 20% stake to Mitsubishi UFJ Financial Group for VND15.5 trillion ($739 million). In a January report, Moody’s wrote: “VietinBank could become—among Moody’s-rated Vietnamese banks—the institution with the highest capitalization by a significant margin, thereby materially distancing it from the risk of insolvency on a comparative basis.”
Pham Huy Hung, chairperson / www.vietinbank.vn