Foreign Bank Tracker 2020 minterellison.com Introduction This is the fifth year in which we have Asian bank growth was consistently strong In addition, reduced oil prices and climate produced this report, which reveals capital The Asian bank growth continued its change concerns, exacerbated by the flow trends into Australia via foreign banks pattern of acceleration, growing to a 17% Australian bushfire crisis, have provided and market analysis of the results. rate of growth in 2019. Asia is a consistently additional challenges for investors. To produce the Foreign Bank Tracker, strong investor in Australia, and with 28 The long term impact of these challenges we drew on the Australian Prudential Asian banks operating in Australia, all Asian is yet to be seen. However, as countries Regulation Authority (APRA) statistics. countries grew resident assets at effectively start to recover and stabilise, we expect The report continues to reveal interesting double digit growth rates. to see a flurry of activity as funds look to patterns of capital investment into invest in businesses. Looking ahead, we John Elias Emerging market issues are set to have a Australia. Indeed, this latest edition shows expect foreign banks to continue to expand Lead Partner, major impact a continued expansion of foreign banks in in Australia, despite significant headwinds. Foreign Bank Tracker our domestic marketplace. Emerging global issues in 2020 are set to have a profound effect on the market A key theme this year was foreign banks' and capital flow into Australia and around [email protected] continued expansion in the Australian the world. We're seeing unprecedented market. In particular, we identified impacts of the COVID-19 pandemic, three highlights: which has emerged as a major operational challenge for all businesses. Foreign European investment was back on businesses such as foreign banks are facing the table travel restrictions and disruptions from the Following a prolonged period of quiet and need to quarantine individuals. Additionally, uncertainty, European banks stood out the supply and demand disruption this year with a 24% rate of growth – the created by COVID-19 has generated highest of all the regions. With renewed cashflow volatility for many businesses, confidence and certainty following Brexit, adding an additional layer of difficulty to Rahoul Chowdry European – and particularly UK-based credit assessment. It has also changed Partner, Financial Services investors – were poised for action, and risk appetites, leading to changes in the keen to look further afield. availability of credit. Industry Lead [email protected] MinterEllison Foreign Bank Tracker 2020 1 Contents Key highlights 3 Key findings: North America 25 The global picture 5 United States of America 27 Foreign bank resident assets 7 Canada 29 Resident asset growth in 2019 - top 10 banks 8 Key Contacts 30 Key findings: Europe 9 Germany and France 11 Netherlands and Switzerland 12 UK Banks 13 Key findings: Asia 14 Asian Banks: Total resident asset value and growth 15 Mainland China 16 Taiwan 18 Japan 19 Singapore 21 India 22 South Korea 23 DISCLAIMER: (All financial data and figures including share price information is represented as at 31 July 2019 unless specifically noted). MinterEllison does not represent or warrant that any information provided to you in this document is accurate or complete, or that reasonable care has been taken in the preparation of this document. All information has been taken from publicly available sources. You must make and rely upon your own evaluation of the information in this document. Except as, to the extent, required by law, MinterEllison will not be liable for any direct or indirect loss or damage arising in any way out of the use by you of the information in this document. This document is supplied to you on the condition that it and the contents are confidential and must be kept confidential and not disclosed to any third party. MinterEllison Foreign Bank Tracker 2020 2 Key highlights Strong double digit growth compared to sub-inflation growth for three of the four big four Australian banks (though off a substantially lower base); One new foreign bank Regional growth spurts YOY growth • Societe Generale from France, which • Europe was the fastest growing region, • Swiss banks grew 43% has returned to the Australian market growing resident Australian assets 24% - • UK banks grew 42% after a six year absence. its highest rate of growth since 2007. • German banks contracted by 3% • While it has not obtained an ADI • Asian banks accelerating year on • French banks grew 1% licence, 2019 also saw the return of year (YOY) growth to 17% after 15% Barclays Capital. the previous year. Asian banks grew • Chinese banks grew 20% resident Australian assets by $25.8 billion • Japanese banks grew 10% in aggregate. • Indian banks grew 93% • North American banks grew resident Australian assets by 18%, the strongest growth since 2010. MinterEllison Foreign Bank Tracker 2020 3 The long term impact of challenges such as the COVID-19 pandemic, reduced oil prices and climate change concerns is yet to be seen. However, as countries start to recover and stabilise, we expect to see a flurry of activity as funds look to invest. John Elias, Partner - MinterEllison MinterEllison Foreign Bank Tracker 2020 4 The global picture Growth rates have picked Total Resident Assets Held by Selected Groups Europe North America up on the past year across of Banks - growth rates Asia all regions. Europe had Total Resident Assets Held by Selected Groups of the greatest lift in growth, Banks - growth rates driven primarily by domestic subsidiaries of 60% HSBC and ING. 50% While there is still some variation, the volatility in 40% Asian banks growth rates 30% has been significantly lower than of those in Europe or 20% the US. 10% 0% -10% -20% -30 % 2003 2005 2007 2009 2011 2013 2015 2017 2019 Europe North America Asia MinterEllison Foreign Bank Tracker 2020 5 The global picture (cont.) Total Resident Assets Held by Selected Total Resident Assets Held by Foreign Banks Groups of Banks - CAGR since 2002 in Australia Europe Europe North America North America Asia Asia Total Resident Assets Held by Selected Groups of Total Resident Assets Held by Foreign Banks in Banks - CAGR since 2002 A$ billions Australia 40% 350 300 30% 250 20% 200 10% 150 0% 100 -10% 50 -20% 0 2003 2005 2007 2009 2011 2013 2015 2017 2019 2002 2003 2004 200520062007 2008 2009 2010 2010 2012 2013 2014 2015 2016 2017 2018 2019 Europe North America Asia Europe North America Asia MinterEllison Foreign Bank Tracker 2020 6 Foreign bank resident assets European banks have the Total Resident Assets Held by Foreign Banks in Australia most resident assets of foreign banks, followed Total Resident Assets Held by Foreign Banks in by Asian banks and finally A$ billions Australia Europe North American banks. North America 600 Asia Over the past year, European banks in Australia have been the fastest 500 growing of banks from the three different regions. 400 300 200 100 0 2002 2004 2006 2008 2010 2012 2014 2016 2018 2003 2005 2007 2009 2011 2013 2015 2017 2019 Europe North America Asia MinterEllison Foreign Bank Tracker 2020 7 Resident asset growth in 2019 - top 10 banks While seven out of the top ten fastest growing foreign banks in Australia were Asian, they were relatively small in dollar asset terms. There are two banks from the UK, HSBC and Standard Chartered, with HSBC having a meaningful size of $49.3 billion of assets. The eighth fastest growing bank was the European region (Swiss) UBS, which grew resident assets to $17.9 billion, up 55% over the past year. Rounding out the top 10 is the Bank of Sydney, a subsidiary of the Bank of Beirut Group. Top 10 foreign banks for resident asset growth 250.0% UK Europe Asia Other 200.0% 150 .0% 100.0% Growth Rate % (logarithmic) 50.0 % 0.0% 0 2 4 6 8 10 Rank MinterEllison Foreign Bank Tracker 2020 8 Key findings: Europe In 2019, Europe was the fastest growing region. There are 15 European banks operating in Australia. However, this double or triple counts some banks operating under multiple licences such as ING, Rabobank, Investec, BNP Paribas, and HSBC. This includes an increase of two over the past year, namely Investec Bank (the parent of the domestically incorporated Investec, which has been operating in Australia for some time), and Societe Generale, which has returned to the Australian market after a six year absence. While it has not obtained an ADI licence, 2019 also saw the return of Barclays Capital. UK banks in aggregate were the fastest growing in Europe, with growth over the past year of 42%. French banks in aggregate were growing the slowest at 0.6%, while the only German bank operating in Australia, Deutsche Bank, saw its resident assets decline by 3.2%. Of individual banks, ABN Amro was the fastest growing, increasing resident assets by over 152 times from a very small base, having just returned to Australia at the end of last year. HSBC Australia, Standard Charted and UBS all grew resident Australian assets by over 50%. BNP Paribas and Deutsche Bank both contracted resident Australian assets over the past year. MinterEllison Foreign Bank Tracker 2020 9 Key findings: Europe (cont.)A$ billions European banks 350 60% 50% 300 40% • European region banks grew A$ billions 250 European banks 30% resident Australian assets by 350 A$ billions 60% European banks 200 20% $47.2 billion in aggregate, the 350 60% 50% 10% equivalent of 24%. 300 150 50% 300 • Dutch banks are the largest in 40% 0% 100 40% Australia, followed by British 250 250 -10% 30% 30% A$ billions A$ billions 50 European banksEuropean banks banks.