Financial Institutions in Asia
The rise of Asia as a financial powerhouse and the rapidly growing middle-class of the continent makes it extremely attractive to foreign financial institutions. The stability of the regional ecosystem proved that the populous market is worth serving and this resulted in large-scale expansions of multiple international organizations. Among them are famous names like Julius Baer Group, Bank of America, Wells Fargo, HSBC and others.
As the Asian continent accumulate more and more assets in the form of savings, we can notice that the wealth management industry is growing even quicker. This reflects the sharp increase in the number of high-net-worth individuals benefiting from the region’s extraordinarily resilient economic growth.
In addition, rapid urbanization and the growth of the middle class in the region requires improved urban infrastructure, including amenities, utilities, and links between production locations and centers of domestic consumption. In this respect, countries in the region face huge needs for infrastructure development. However, although the region has an abundance of domestic savings that can be used to finance these infrastructure needs, it is ironic that it is excessively dependent on volatile capital streams for its development.
The problems mentioned in the previous paragraph leave plenty of space for international players to move on to the market and utilize the potential behind the underserved sections of the population. Up until recently the financial services were mostly concentrated around short term lending but as Asian nations continues to develop and mature this is about to change. In the past the short duration of banks’ liabilities limited their capacity to finance long-term investments such as home loans and infrastructure investments.
All the upper-mentioned gaps and the large size of the Asian market gained the attention of numerous international financial institutions and with this chapter we aim to give a broad overview of their efforts to take part into the burgeoning “tiger” economies of China, India, Pakistan, Indonesia and the rest of Asia.
The mindmap created by Deep Knowledge Analytics features more than 425 financial institutions already operating on the continent or planning to set a foothold on it. The idea behind it is to provide key insights and give decision makers a strong base on which they could construct they expansion strategy.
Asian Financial Sector
As the share of Asia in world GDP and global capital is growing rapidly, western financial institutions are planning to increasing their involvement in eastern region. Moreover, Asian-based banks see local opportunities too, and follow the trend of regional rather than global expansion. “Asia is now one third of global GDP with a growth rate of 6%. Why would I allocate capital to the other two thirds growing at 1.5%?” - says Piyush Gupta, chief executive of DBS in Singapore, one of the most expansive of Asian banks.
Demographics in Asia have grown rapidly over time, and the Asian Development Bank predicts that the number of Asians needing banking services will increase by three billion by 2050. In addition, by that time, per capita income in purchasing power parity is expected to increase sixfold, by which time the continent will account for 52% of global GDP.
The government plays a larger role in banking in many Asian emerging markets, especially China and India, than in the rest of the world. In China, for example, the five largest banks are government-controlled, and in India, state-owned banks account for about three-quarters of the system's assets. This also applies to non-bank financial institutions: in India, one of the world's largest life insurance companies, the Indian Life Insurance Corporation, is controlled by the Government of India.
There is also inequality across the region - state-owned banks in countries such as the Philippines and Thailand account for a much smaller share of total banking sector assets, and private institutional investors play a significant role in Malaysia.
Banks Activity in Asia
As it could be noticed from the graph, Asia is an attractive market to large Western banks.
HSBC and City Group have the biggest number of Asian employees and that number is expected to grow as the local financial landscape continues to mature.