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
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. -20% 200 20% 350 350 200 60% 60% 20% • ING Bank (Australia) is the 0 -30% 150 10% largest European region bank, 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 50%2015 201650% 2017 2018 2019 300 300 10% following by HSBC Bank 150 ING Bank (Australia) Limited Deutsche Bank Aktiengesellschaft 0% 100 40% 40% Australia, Rabobank and UBS.250 250 HSBC Bank Australia Limited Rabobank Australia Limited -10% 30% 30% 0% 100 UBS AG 50 Bank of Scotland plc 200 200 -20% 20% 20% -10% BNP Paribas Cooperatieve Rabobank U.A. 0 -30% 150 150 50 10% 10% The Hongkong and Shanghai Banking Corporation Limited 2002 2003Societe2004 Generale2005 2006 2007 2008-20% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 The Royal Bank of Scotland N.V. ING Bank N.V.(Australia) Limited0% 0% Deutsche Bank Aktiengesellschaft 100 100 0 -30% The Royal Bank of Scotland plc CreditHSBC BankSuisse Australia AG -10%Limited -10% Rabobank Australia Limited 50 50 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Barclays Bank PLC LloydsUBS AG TSB Bank plc -20% -20% Bank of Scotland plc ING Bank Investec(Australia) Bank Limited plc Deutsche Bank Aktiengesellschaft InvestecBNP Paribas Bank (Australia) Limited Cooperatieve Rabobank U.A. 0 0 -30% -30% HSBC Bank Australia Limited Rabobank Australia Limited 2002 2003 20022004 20032005 20042006 20052007 20062008 WestLB20072009 AG20082010 20092011 20102012 20112013 20122014 20132015 20142016 20152017 2016BNPThe2018 HongkongParibas20172019 Securities and2018 Shanghai Services2019 Banking Corporation Limited Societe Generale ING Bank (Australia)ING Limited Bank (Australia) LimitedUBS AG HSBC Bank Plc Deutsche Bank BankAktiengesellschaftDeutsche of Scotland Bank Aktiengesellschaftplc BankThe Royal of Cyprus Bank Australiaof Scotland Limited N.V. ING Bank N.V. HSBC Bank AustraliaHSBC Limited Bank Australia LimitedBNP ParibasNM Rothschild & Sons (Australia) Limited Rabobank AustraliaCooperatieveRabobank Limited Australia Rabobank Limited U.A. StandardThe Royal Chartered Bank of Scotland Bank plc Credit Suisse AG
UBS AG UBS AG The HongkongDresdner and BankShanghai AG Banking Corporation BankLimited of ScotlandSociete Bankplc of Generale Scotland plc AlliedBarclays Irish Bank Banks, PLC Public Limited Company Lloyds TSB Bank plc
BNP Paribas BNP Paribas The RoyalStandard Bank of ScotlandChartered N.V. Grindlays Bank LimitedCooperatieve RabobankINGCooperatieve Bank U.A.N.V. Rabobank U.A. BancoInvestec Santander, Bank plc S.A. Investec Bank (Australia) Limited
The Hongkong andThe Shanghai Hongkong Banking and Shanghai CorporationThe RoyalBanking LimitedFortis Bank Corporation Bankof Scotland SA/NV Limited plc Societe GeneraleCreditSociete Suisse Generale AG ABNWestLB AMRO AG Bank N.V. BNP Paribas Securities Services
The Royal Bank ofThe Scotland Royal Bank N.V. of ScotlandBarclays N.V. BankTotal PLC Europe Growth % ING Bank N.V. LloydsING Bank TSB BankN.V. plc HSBC Bank Plc Bank of Cyprus Australia Limited
The Royal Bank ofThe Scotland Royal Bank plc of ScotlandInvestec plc Bank plc Credit Suisse AGInvestecCredit SuisseBank (Australia) AG Limited NM Rothschild & Sons (Australia) Limited Standard Chartered Bank
Barclays Bank PLCBarclays Bank PLC WestLB AG Lloyds TSB BankBNP Lloydsplc Paribas TSB SecuritiesBank plc Services Dresdner Bank AG Allied Irish Banks, Public Limited Company Investec Bank plcInvestec Bank plc Investec Bank (Australia)Investec Limited Bank (Australia) Limited Standard Chartered Grindlays Bank Limited Banco Santander, S.A. HSBC Bank Plc Bank of Cyprus Australia Limited WestLB AG WestLB AG BNP Paribas SecuritiesBNP Paribas Services Securities Services Fortis Bank SA/NV ABN AMRO Bank N.V. NM Rothschild & Sons (Australia) Limited Standard Chartered Bank HSBC Bank Plc HSBC Bank Plc Bank of Cyprus AustraliaBank of LimitedCyprus Australia Limited Total Europe Growth % Dresdner Bank AG Allied Irish Banks, Public Limited Company NM Rothschild & NMSons Rothschild (Australia) & Limited Sons (Australia) Limited Standard CharteredStandard Bank Chartered Bank Standard Chartered Grindlays Bank Limited Banco Santander, S.A. Dresdner Bank AGDresdner Bank AG Allied Irish Banks,Allied Public Irish Limited Banks, Company Public Limited Company Fortis Bank SA/NV ABN AMRO Bank N.V. Standard CharteredStandard Grindlays Chartered Bank Limited Grindlays Bank Limited Banco Santander,Banco S.A. Santander, S.A. MinterEllison Total Europe Growth % Foreign Bank Tracker 2020 10 Fortis Bank SA/NVFortis Bank SA/NV ABN AMRO BankABN N.V. AMRO Bank N.V. Total Europe GrowthTotal % Europe Growth % Germany A$ billions German banks A$ billions French banks and France 45 60% 60 200%
40 50%
50 150% 40% 35
30% 30 40 100%
20% 25 Dresdner Bank AG BNP Paribas Securities Services German banks WestLB AG French banks 10% Societe Generale 30 50% Deutsche Bank Aktiengesellschaft 20 BNP Paribas
Total Germany Growth % 0% Total France Growth % Dutch banks A$ billions German banks A$ billions French banks 15 A$ billions 20 0% 140 50% 45 60% 60 -10% 200%
10 -20% 40 50% 120 10 -50% 40% 50 150% 40% 5 -30% 35 100 30% 0 -40% 30% 0 -100% 30 40 100%
20% 80 25 20% 10% 30 50%
20 60 0% 10% 15 20 0% 40 -10%
10 -20% 0% 1020 -50%
5 -30%
0 -10% 0 -40% 0 -100% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 ING Bank (Australia) Limited ING Bank N.V. Rabobank Australia Limited Deutsche Bank Aktiengesellschaft WestLB AG Dresdner Bank AG Total Germany Growth % BNP Paribas Societe Generale BNP Paribas Securities Services Total France Growth % Cooperatieve Rabobank U.A. Fortis Bank SA/NV ABN AMRO Bank N.V.
Total Netherlands Growth %
MinterEllison Foreign Bank Tracker 2020 11 A$ billions Dutch banks Netherlands 140 50% A$ billions Swiss banks
30 80% 120 and Switzerland 40%
100 25 60%
30%
ABN AMRO Bank N.V. 80 Fortis Bank SA/NV 20 40%
Cooperatieve Rabobank U.A. 20% Rabobank Australia Limited 60 Credit Suisse AG ING Bank N.V. 15 20% Dutch banks ING Bank (Australia) Limited Swiss banks UBS AG
Total Netherlands Growth % 10% Total Switzerland Growth % Dutch banks A$ billions A$ billions Swiss banks A$ billions Dutch banks 40 140 50% 10 0% 140 50% 30 80%
0% 120 20 120 40% 40% 25 60% 5 -20%
100 100 30% 0 -10% 30% 20 40% 0 -40% 80 80 20% 20% 15 20% 60 60
10% 10% 10 0% 40 40
0% 20 0% 5 -20% 20
0 -10% 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 -10% 0 -40% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 ING Bank (Australia) Limited ING Bank N.V. Rabobank Australia Limited ING Bank (Australia) Limited ING Bank N.V. Rabobank Australia Limited UBS AG Credit Suisse AG Total Switzerland Growth % Cooperatieve Rabobank U.A. Fortis Bank SA/NV ABN AMRO Bank N.V. Cooperatieve Rabobank U.A. Fortis Bank SA/NV ABN AMRO Bank N.V. Total Netherlands Growth % Total Netherlands Growth %
MinterEllison Foreign Bank Tracker 2020 12 A$ billionsA$ billions UK banksUK banks
120 120 60% 60%
50% 50%
100 100 40% 40%
30% 30% 80 80
20% 20%
60 60 10% 10%
0% 0%
40 40 -10% -10%
-20% -20% 20 20
UK banks -30% -30%
0 0 -40% -40% 2002 20022003 20032004 20042005 20052006 20062007 20072008 20082009 20092010 20102011 20112012 20122013 20132014 20142015 20152016 20162017 20172018 20182019 2019 European banks were the fastest HSBC BankHSBC Australia Bank AustraliaLimited Limited HSBC BankHSBC Plc Bank Plc The HongkongThe Hongkong and Shanghai and Shanghai Banking CorporationBanking Corporation Limited LimitedThe RoyalThe Bank Royal of ScotlandBank of Scotland plc plc growing in Australian in 2019, and The RoyalThe Bank Royal of ScotlandBank of Scotland N.V. N.V. Barclays BarclaysBank PLC Bank PLC banks from the United Kingdom – Bank of ScotlandBank of Scotland plc plc Lloyds TSBLloyds Bank TSB plc Bank plc Investec InvestecBank (Australia) Bank (Australia) Limited Limited Investec InvestecBank plc Bank plc which grew by 42% – played a major NM RothschildNM Rothschild & Sons (Australia) & Sons (Australia) Limited Limited StandardStandard Chartered Chartered Bank Bank part in that. With a new degree of StandardStandard Chartered Chartered Grindlays Grindlays Bank Limited Bank Limited Total UK TotalGrowth UK %Growth % confidence following the UK election A$ billions UK banks and the certainty of Brexit, investors 120 60% started to reengage with the market, looking further afield than Europe. 50% 100 With a positive exchange rate due 40% to the weak Australian dollar and 30% prospects across a wide range of 80 industries, Australian assets were 20% an attractive option. 60 10%
The end of 2019 saw major UK-based funds taking 0% interest in Australian targets, and the increasing bank 40 activity reflected that interest. -10%
While the UK started to boom in January and February -20% 20 of 2020, the global COVID-19 pandemic has slowed the market right down. However, we anticipate that longer -30% term, the opportunities will still be there. Capital-heavy private equity funds have been looking for stability to invest. 0 -40% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Once the market settles, we are likely to see a flurry of HSBC Bank Australia Limited HSBC Bank Plc activity as funds look to invest in businesses – in Australia The Hongkong and Shanghai Banking Corporation Limited The Royal Bank of Scotland plc and all over the world – that require capital injections. The Royal Bank of Scotland N.V. Barclays Bank PLC
Bank of Scotland plc Lloyds TSB Bank plc
Investec Bank (Australia) Limited Investec Bank plc
NM Rothschild & Sons (Australia) Limited Standard Chartered Bank MinterEllison Standard Chartered Grindlays Bank Limited Total UK Growth % Foreign Bank Tracker 2020 13 Key findings: Asia
Asia continued its strong growth, with all Asian countries growing resident assets at effectively double digit growth rates.
2019 saw 28 Asian banks operating in Australia, which was unchanged on last year. Of individual banks, China Everbright bank was the fastest growing, increasing resident assets by almost 12 times. The Bank of Taiwan grew by 2.3 times, while State Bank of India almost doubled resident assets in Australia.
MinterEllison Foreign Bank Tracker 2020 14 Asian Banks: Total resident asset value and growth
Asian banksAsian banks Asian banks grew A$ billions A$ billions 200 60% resident Australian 200 60% 180 180 50% 50% assets by $25.8 billion 160 160 40% in aggregate, the 140 40% 140 30% equivalent of 17%. 120 30% 120 100 20% 100 20% Of the Asian banks, Japanese 80 10% banks are the largest in Australia,80 60 10% followed by Chinese banks. MUFG 0% 60 40 Bank is the largest in Australia, 0% -10% followed by SMBC and Bank of 40 20 -10% China. Mizuho Bank from Japan 20 0 -20% is the fourth largest, followed by 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019-20% two Singaporean banks, UOB MUFG Bank, Ltd. Sumitomo Mitsui Banking Corporation and OCBC. 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Bank of China Limited Mizuho Bank, Ltd. MUFG Bank, Ltd. United Overseas Bank Limited Sumitomo MitsuiOversea-Chinese Banking Corporation Banking Corporation Limited Bank of China LimitedIndustrial and Commercial Bank of China Limited Mizuho Bank,Mega Ltd. International Commercial Bank Co., Ltd. United Overseas BankChina Limited Construction Bank Corporation Oversea-ChineseDBS Bank Banking Ltd Corporation Limited Industrial and CommercialAgricultural Bank Bank of of China China Limited Limited Mega InternationalBank of Communications Commercial Bank Co., Co., Ltd. Ltd. Bank of China (Australia) Limited Taiwan Business Bank China Construction Bank Corporation DBS Bank Ltd First Commercial Bank State Bank of India Agricultural Bank of China Limited Bank of Communications Co., Ltd. Hua Nan Commercial Bank, Ltd. Taiwan Cooperative Bank, Ltd Bank of China (Australia) Limited Taiwan Business Bank KEB HANA Bank E.SUN Commercial Bank, Ltd. First Commercial BankTaishin International Bank Co., Ltd State Bank ofWoori India Bank Hua Nan CommercialShinhan Bank, Bank Ltd. Co., Ltd Taiwan CooperativeBank of Baroda Bank, Ltd KEB HANA Bank China Merchants Bank Co., Ltd E.SUN CommercialUnion Bank Bank, of India Ltd. Taishin InternationalBank Bank of TaiwanCo., Ltd Woori BankTotal Asia Growth % Shinhan Bank Co., Ltd Bank of Baroda China Merchants Bank Co., Ltd Union Bank of India Bank of Taiwan Total Asia Growth %
MinterEllison Foreign Bank Tracker 2020 15 Mainland China
Bank of China remains the largest Chinese bank by resident Australian assets. Its percentage growth relative to other Chinese banks in Australia has slowed in recent years, but that comes off a higher base – so Bank of China still has the fastest growth by dollar value of resident assets in the region.
The top three Chinese banks by Australian that long term, this trend will continue We still expect the trend and approach of resident asset growth in percentage based on the trends of their market peers at China’s banks to follow their clients, which terms are China Everbright Bank, China similar stages in market presence. includes ongoing investment in Australia Merchants Bank, and Agricultural Bank of and a continued interest in industries such China. The two newest entrants, China In 2019, the overall story for the mainland as minerals and resources, education, Merchants Bank and China Everbright Bank, Chinese banks appeared to be one of agritech, biomedicine and health. However, grew substantially. Although their growth continued measured growth among the outbreak of COVID-19 and China's comes off a lower base, the growth rates established players and continued searches anticipated 14th five year plan will shape – show their committed approach to the for growth among newer market entrants. and possibly change – these trends. Australian market is taking root. They have As with previous years, the data reinforces also had success in growing resident assets. the view that Australia and China have Notwithstanding the current uncertainty relatively complementary economies. and major global challenges, we expect
In 2019, the overall story for the mainland Chinese banks appeared to be one of continued measured growth among established players and continued searches for growth among newer market entrants.
MinterEllison Foreign Bank Tracker 2020 16 ChineseChinese banks banks A$ billionsA$ billions 70 70 250% 250%
60 60 200% 200%
50 50 150% 150%
40 40
100% 100%
30 30
50% 50% 20 20
0% 0% Mainland10 China10 (cont.)
0 0 -50% -50% 2002 20022003 20032004 20042005 20052006 20062007 20072008 20082009 20092010 20102011 20112012 20122013 20132014 20142015 20152016 20162017 20172018 20182019 2019
Bank ofBank China of China Limited Limited Bank ofBank China of China (Australia) (Australia) Limited Limited IndustrialIndustrial and Commercial and Commercial Bank ofBank China of China Limited Limited ChinaChina Construction Construction Bank CorporationBank Corporation AgriculturalAgricultural Bank ofBank China of China Limited Limited Bank ofBank Communications of Communications Co., Ltd. Co., Ltd. ChinaChina Merchants Merchants Bank Co.,Bank Ltd Co., Ltd ChinaChina Everbright Everbright Bank Co.,Bank Ltd Co., Ltd Total TotalChina China Growth Growth % % Chinese banks A$ billions 70 250%
60 200%
50 150%
40
100%
30
50% 20
0% 10
0 -50% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Bank of China Limited Bank of China (Australia) Limited Industrial and Commercial Bank of China Limited China Construction Bank Corporation Agricultural Bank of China Limited Bank of Communications Co., Ltd. China Merchants Bank Co., Ltd China Everbright Bank Co., Ltd Total China Growth %
MinterEllison Foreign Bank Tracker 2020 17 A$ billionsA$ billions TaiwaneseTaiwanese banks banks
12 12 80% 80%
70% 70%
10 10 60% 60%
50% 50% 8 8
40% 40%
6 6 30% 30%
20% 20%
4 4 10% 10%
0% 0% 2 2 Taiwan -10% -10%
0 0 -20% -20% 2002 20032002 20042003 20052004 20062005 20072006 20082007 20092008 20102009 20112010 20122011 20132012 20142013 20152014 20162015 20172016 20182017 20192018 2019 Under the principle of Mega InternationalMega International Commercial Commercial Bank Co., Bank Ltd. Co., Ltd.Taiwan BusinessTaiwan BankBusiness Bank one country, two systems, First CommercialFirst Commercial Bank Bank Hua Nan HuaCommercial Nan Commercial Bank, Ltd. Bank, Ltd. Taiwanese banks are Taiwan CooperativeTaiwan Cooperative Bank, Ltd Bank, Ltd E.SUN CommercialE.SUN Commercial Bank, Ltd. Bank, Ltd. subject to entirely different Taishin InternationalTaishin International Bank Co., Bank Ltd Co., Ltd Bank of TaiwanBank of Taiwan Total TaiwanTotal Growth Taiwan % Growth % governance and regulation A$ billions Taiwanese banks to their mainland Chinese 12 80% counterparts. In aggregate, 70% Taiwan's banks now have 10 60% $11.4 billion of resident 50% Australian assets, up 30.7% 8 over the past year. 40%
6 30% Mega International Commercial Bank remains the largest Taiwanese bank by resident assets 20% in Australia; and the third fastest growing in 4 10% the region in dollar terms, however it was the second slowest growing in percentage terms. 0% 2 The top three Taiwanese banks by percentage -10% growth in Australian resident assets were Bank of Taiwan (which is also the smallest by 0 -20% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 resident Australian assets), E. Sun Commercial Bank and Taiwan Cooperative Bank. Mega International Commercial Bank Co., Ltd. Taiwan Business Bank First Commercial Bank Hua Nan Commercial Bank, Ltd. The Taiwanese banks' presence in Australia remains an area of healthy growth to Taiwan Cooperative Bank, Ltd E.SUN Commercial Bank, Ltd. be watched, albeit on a smaller scale to Taishin International Bank Co., Ltd Bank of Taiwan mainland China. Total Taiwan Growth %
MinterEllison Foreign Bank Tracker 2020 18 Japan
Japanese bank activity in SMBC's exposure is likely to grow in investment, only behind the United States. Australia continued to go Australia following their commitment In 2019, Japanese corporate investment to the NSW Government in respect of in Australia soared to a record $26 billion from strength to strength in the Western Sydney Airport and Western headlined by the A$16 billion purchase of 2019. MUFG remains Japan's Sydney Aerotropolis, Australia's largest Carlton & United Breweries by Asahi. largest bank in Australia and single infrastructure project. This is expected to commence operations in Finally, despite Japan's continued reliance grew its resident Australian 2026. on coal as part of its energy mix, the global assets by 14% or $3.6 billion push toward a decarbonised economy is to $29.3 billion last year. Both Western Sydney Airport and Western gaining some traction in Japan. Certain Sydney Aerotropolis and the broader Japanese banks have recently announced SMBC and Mizuho Bank also significant infrastructure pipeline in Australia moves to no longer support certain strengthened their presence has also recently attracted Sumitomo Mitsui coal-fired generation projects. SMBC and with $24 billion and $17.7 Trust Bank (SMTB) to the Australian market Mizuho have both announced they will in September 2019. no longer finance high carbon emitting billion in resident assets coal-fired generation projects and MUFG respectively. This increased The continued surge in Japanese bank has confirmed it will no longer finance new by $1.4 billion and $1.2 billion activity in Australia reflects the broader coal-fired power generation projects. economic trends in Japan. The Japanese over the past year, equivalent economy, like all major economies at to increases of 6.4% and 7.3%. present, is under pressure from the global For MUFG and SMBC, this headwinds that COVID-19 presents, notwithstanding a massive US$120 billion now places them fifth and stimulus package announced in December sixth respectively in loan 2019. Coupled with a decreasing Japanese portfolio size in Australia, population and the Bank of Japan's only behind Australia's 'big inability to reach its 2% inflation targets, these factors are driving Japan's mega four' banks and ahead of other banks offshore for growth opportunities significant banks in Australia together with the remainder of Japan Inc. such as Bank of China and Australia is capturing significant amounts of Japanese capital and is now the second Rabobank. most favoured destination for Japanese
MinterEllison Foreign Bank Tracker 2020 19 A$ billions Japanese banks
80 80%
70% 70
60%
60 Japan (cont.) 50%
50 40%
Mizuho Bank, Ltd. 30% Sumitomo Mitsui Banking Corporation 40 MUFG Bank, Ltd. 20% Total Japan Growth % A$ billions Japanese banks 30 10% 80 80%
0% 70% 20 70 -10% 60% 10 60 -20% 50%
0 -30% 40% 50 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
30% 40 20%
30 10%
0% 20
-10%
10 -20%
0 -30% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
MUFG Bank, Ltd. Sumitomo Mitsui Banking Corporation Mizuho Bank, Ltd. Total Japan Growth %
MinterEllison Foreign Bank Tracker 2020 20 A$ billions Singaporean banks
35 80%
70%
30 Singapore 60%
50% 25
Singapore's three banks present in Australia DBS Bank Ltd 40% 20 have been growing steadily, and as a Oversea-Chinese Banking Corporation 30% Limited percentage of total growth, have flattened United Overseas Bank Limited 20% out and are steady. 15 Total Singapore Growth % 10% A$ billions Singaporean banks
35 80% 10 While interest from Singaporean investors remains strong, decision- 0% making in regards to those investments is more cautious and it is 70% taking longer to get relevant approvals to proceed. 2019 still saw -10% 30 5 a number of existing investors in Australia building on their assets, 60% albeit at a steadier rate. -20% 25 50% Anecdotally, there are stories of significant capital flows from Hong 0 -30% 40% 2002 2003 2004 2005 2006 2007 20082009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Kong into Singapore, which may present an opportunity in the 20 future. However, precisely where those funds are flowing is not yet 30% evident. 20% 15 At the end of 2019 and through the beginning of 2020, there were a 10% number of enquiries from Singapore regarding potential investments around assets in Australia. As has been the case for some time, most 10 0% investments from Singapore relate to property assets in diverse -10% industries, particularly using Real Estate Investment Trusts. These 5 ranged from commercial properties and office buildings to aged -20% care facilities. There has also been recent interest in the hospitality 0 -30% sector. Student accommodation and retail assets have been 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 particularly attractive. While retail has been generally identified as a United Overseas Bank Limited Oversea-Chinese Banking Corporation Limited weakening sector in Australia, Singaporean companies are still seeing DBS Bank Ltd Total Singapore Growth % great opportunity there – not necessarily in major capital cities, but in sub regional areas. For example, in 2019, SPH REIT Management jointly acquired Figtree Grove Shopping Centre in Wollongong, NSW.
MinterEllison Foreign Bank Tracker 2020 21 A$ billions Indian banks 3.5 350%
300% India 3.0 250% 2.5
200% Australia is viewed as a relatively small but Union Bank of India 2.0 Bank of Baroda 150% priority market for Indian banks. In the State Bank of India 1.5 future, we are likely to see an increase in Total India Growth % 100% their footprint in Australia – albeit from a 1.0 A$ billions Indian banks 50% low starting base – for a number of reasons. 3.5 350% 0.5 0% Investors are looking to capitalise on opportunities presented by 300% 3.0 a secure environment and a relatively healthy (though currently 0.0 -50% challenged) economy, while banks are looking to provide expert transactional facilities, particularly remittances, to the growing Indian 250% 2.5 diaspora and to position themselves for anticipated two-way trade growth between the two countries. 200% 2.0 State Bank of India (SBI) recently established a branch in Melbourne with some immediate success. Significantly, total resident assets 150% held by Indian banks grew by 100% during the 12 month period to 1.5 31 December 2019, and 300% over the last 24 months. Growth has 100% predominantly been fuelled by Australian companies doing business domestically in the telecom, retail, food and beverage, packaging, 1.0 entertainment, healthcare, agriculture and mining industries. This 50% group accounts for approximately 80% of resident assets as well 0.5 as growth. Other growth has come from Australian and Australian 0% based Indian companies - also domestically – but who are also doing business in India. 0.0 -50% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 These are the result of three factors: an increase in capacity and capability, continued improvement in service levels and the fallout State Bank of India Bank of Baroda Union Bank of India Total India Growth % for Australian major financial institutions reputationally as a result of the 2018 Financial Services Royal Commission.
MinterEllison Foreign Bank Tracker 2020 22 South Korea
South Korea's banks continued to actively look overseas for opportunities and faster profit growth, given their domestic market no longer offered the revenues and growth potential it once did.
However, the presence of major Korean banks investing and operating in Australia has operating in Australia (the likes of Woori Bank, incentivised banks to follow. In September 2019, Shinhan Bank and KEB Hana Bank) have gone NongHyup Bank expressed its intention to expand relatively unnoticed as they have not been into Australia to assist with the financing of state- overtly aggressive in their approach to penetrate run infrastructure and agricultural projects, in the Australian market. Korean banks' desire addition to enhancing financing and investment for international growth has been focused on banking services. the South-East Asian region, opting to be well- established locally and in other Asian countries Recently, Korea's banking industry embraced the before widening their investment reach. power of digital innovation with the launch of While South Korea is well-positioned to do so, Open Banking services in December 2019, as well success in Australia would require strong brand as the establishment of two internet only banks, recognition as this would subsequently attract Kakaobank and K Bank in 2017. This could present customers and investment opportunities. This untapped opportunities for both countries to co- has proved increasingly challenging as many operate and mutually benefit by penetrating the of Korea's financial services and offerings have digital banking market. been localised, influencing both consumers While potential for the growth of Korean banks and investors to opt for familiarity over new in the Australian banking sector remains strong, business models. the current global challenges surrounding the Despite this, Korean banks recognise the outbreak of the COVID-19 pandemic has caused a significance of international expansion and significant downturn in spending and investment. embracing new technologies in order to thrive Inevitably, this is producing limited scope for new in a future filled with increased competition Korean investments and will continue to do so and volatility in an unpredictable market. The until economies stabilise. increasing presence of Korean corporations
MinterEllison Foreign Bank Tracker 2020 23 A$ billions Korean banks
2,500 600%
500% South Korea (cont.) 2,000 400%
1,500 300% Shinhan Bank Co., Ltd Woori Bank KEB HANA Bank 200% Total Korea Growth % 1,000
A$ millions Korean banks 100%
2,500 600% 500
0% 500%
2,000 0 -100% 400% 2012 2013 2014 2015 2016 2017 2018 2019
1,500 300%
200% 1,000
100%
500
0%
0 -100% 2012 2013 2014 2015 2016 2017 2018 2019
KEB HANA Bank Woori Bank Shinhan Bank Co., Ltd Total Korea Growth %
MinterEllison Foreign Bank Tracker 2020 24 Key findings: North America
North American banks are the smallest foreign region by resident Australian assets. However, they grew by 17.7% over the past year to $103.9 billion, over $100 billion for the first time.
There are 11 North American banks operating in Australia (although this double counts banks operating under multiple licences, such as Citibank).
Canadian banks in percentage terms grew much faster than US banks, with growth over the past year of 25.2% compared to 16.3%. However the larger existing onshore presence of US banks saw them increase the dollar value of resident Australian assets by 3.5 times the increase of Canadian banks.
Of individual banks, CIBC was the fastest growing, increasing resident assets by 39.2% or just over $1 billion, from a relatively small base.
JP Morgan and State Street both contracted resident Australian assets over the past year.
MinterEllison Foreign Bank Tracker 2020 25 Key findings: North America (cont.)
North American A$ billions North American banks banks grew resident 120 40% Australian assets by $15.6 billion 100 30% in aggregate, the equivalent of 17.7%. US 80 20% banks have just over five times the residentA$ billions A$ billions North AmericanNorth American banks banks Australian assets of 120 120 60 40% 40% 10%
Canadian banks. 100 100 30% 30% 40 0% 80 80 20% 20% The major US banks dominate the North American banks with 60 60 10% 10% residents in Australia, led by 20 -10%
Citibank, JP Morgan and Bank of40 40 0% 0% America. 0 -20% 20 20 -10% -10% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
0 0 Citibank, N.A. Citigroup Pty Limited -20% -20% 2002 20032002 20042003 20052004 20062005 20072006 20082007 20092008 20102009 20112010 20122011 20132012 20142013 20152014 20162015 20172016 20182017 20192018 2019 JPMorgan Chase Bank, National Association Bank of America, National Association Citibank, N.A.Citibank, N.A. Citigroup CitigroupPty Limited Pty Limited JPMorganJPMorgan Chase Bank, Chase NationalRoyal Bank, Association NationalBank of Association CanadaBank of America,Bank of NationalAmerica, Association National AssociationState Street Bank and Trust Company Royal BankRoyal of Canada Bank of CanadaThe Toronto-DominionState BankStreetState Bank Street and BankTrust andCompany TrustThe Company Northern Trust Company The Toronto-DominionThe Toronto-Dominion BankThe Bank Bank of Nova ScotiaThe NorthernThe TrustNorthern Company Trust CompanyCanadian Imperial Bank of Commerce The Bank Theof Nova Bank Scotia of Nova Scotia Canadian CanadianImperial Bank Imperial of Commerce Bank of Commerce PayPal Australia Pty Limited Bank One, National Association PayPal AustraliaPayPal Pty Australia Limited Pty Limited Bank One,Bank National One, Association National Association The Bank of New York Mellon Total North America Growth % The Bank Theof New Bank York of NewMellon York Mellon Total NorthTotal America North Growth America % Growth %
MinterEllison Foreign Bank Tracker 2020 26 United States of America
Investment by US banks in Citibank continues to lead in Australia (including reverse factoring financing Australian assets increased having built up A$44 billion in assets since and Term Loan B facilities), highlighting becoming one of the first foreign banks to the increasing risk appetite of US banks materially throughout be granted a banking licence in the mid- operating in Australia. 2019, with assets under 1980s. In addition to its retail business, in With continued weakness in the Australian management growing by 2019 it added a commercial division with its own balance sheet, targeting Australian dollar and Australian banks focusing 16.8% to $86.7 billion. The companies operating in both domestic on their primary business of domestic significant increase was due and international markets. While Goldman mortgages, US banks are likely to continue to a combination of factors Sachs continues to be active in leveraged to increase their presence and capital deployment in Australia long term. This will including a continuing search finance, the Jefferies Group and smaller US mutual trusts and insurance companies be impacted by the uncertainty created by for yield globally. Australia were also lending into the Australian market COVID-19, though when markets return provided a relatively safe for the first time. to some normality, the disruption may provide additional opportunity for US banks and reliable regulatory and While US banks continue to trail European with capital to deploy. There is also likely political environment. US banks in terms of their presence and to be renewed investment in green and banks have also continued to investment in Australia, Bank of America sustainable financing and impact funding as capitalise on opportunities Merrill Lynch and JP Morgan demonstrated the global business community and lenders an increasingly active interest in real estate, become increasingly aware of the financial arising from the withdrawal technology and infrastructure sectors impacts of sustainable investing – though from certain market segments throughout 2019. due to current events, this may not be a focus in 2020. of domestic Australian lenders There was also growth in the use of in the wake of the Financial financial products more commonly found Services Royal Commission. in the developed US and Asian markets
MinterEllison Foreign Bank Tracker 2020 27 A$ billions A$ billions US banks US banks
100 100 40% 40%
90 90
30% 30% 80 80
70 70 20% 20%
60 60
50 50 10% 10%
40 40
0% 0% 30 30
United20 States20 of America (cont.) -10% -10%
10 10
0 0 -20% -20% 2002 2003 20022004 20032005 20042006 20052007 20062008 20072009 20082010 20092011 20102012 20112013 20122014 20132015 20142016 20152017 20162018 20172019 2018 2019
Citibank, N.A. Citibank, N.A. Citigroup Pty LimitedCitigroup Pty Limited JPMorgan ChaseJPMorgan Bank, National Chase Association Bank, National Association Bank of America,Bank National of America, Association National Association State Street BankState and StreetTrust CompanyBank and Trust Company The Northern TrustThe CompanyNorthern Trust Company PayPal Australia PayPalPty Limited Australia Pty Limited Bank One, NationalBank Association One, National Association The Bank of NewThe York Bank Mellon of New York Mellon Total US GrowthTotal % US Growth %
A$ billions US banks
100 40%
90
30% 80
70 20%
60
50 10%
40
0% 30
20 -10%
10
0 -20% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Citibank, N.A. Citigroup Pty Limited JPMorgan Chase Bank, National Association Bank of America, National Association State Street Bank and Trust Company The Northern Trust Company PayPal Australia Pty Limited Bank One, National Association The Bank of New York Mellon Total US Growth %
MinterEllison Foreign Bank Tracker 2020 28 Canadian banks A$ billions 20 80%
18 60% Canada 16 40% 14
12 Canadian investment Canadian Imperial Bank of Commerce 20% The Bank of Nova Scotia in Australia continued 10 to be driven by large The Toronto-Dominion Bank Royal Bank of Canada 0% 8 pension funds. Sectors of Canadian banks Total Canada Growth % A$ billions particular interest were 20 80% 6 infrastructure, including -20% 18 PPPs, universities, 60% 4 education and transport, 16 as well as real estate assets. -40% 14 40% 2
Royal Bank of Canada continued to 12 0 -60% be the largest Canadian bank in the 20% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Australian market in 2019, with its $10 10 billion of resident Australian assets that 0% made up over half of the total Canadian 8 banks’ resident Australian assets of
$17.2 billion. This is despite it selling its 6 -20% Australian asset servicing business to Citi Australia in December. 4 -40% CIBC was the fastest growing Canadian 2 bank, increasing resident assets by 39.2% or $1 billion. 0 -60% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Royal Bank of Canada The Toronto-Dominion Bank The Bank of Nova Scotia Canadian Imperial Bank of Commerce Total Canada Growth %
MinterEllison Foreign Bank Tracker 2020 29 Key Contacts
John Elias Victoria Allen Rahoul Chowdry Jeremy Blackshaw Lead Partner, Partner, Partner, Managing Partner, Foreign Bank Tracker Transaction Solutions Financial Services Industry Lead International +61 2 9921 4115 +61 2 9921 4567 +61 2 9921 8781 +61 3 8608 2922 [email protected] [email protected] [email protected] [email protected]
UK & Europe China Japan Singapore Nicola Marley Chris Carr Geread Dooley David Inglis +44 2074 292786 +86 21 2223 1017 +61 2 9921 4081 +61 3 8608 2906 [email protected] [email protected] [email protected] [email protected]
India South Korea Canada US Rahoul Chowdry Tom Shon Brendan Clark Jeremy Blackshaw +61 2 9921 8781 +61 2 9921 4214 +61 7 3119 6455 +61 3 8608 2922 [email protected] [email protected] [email protected] [email protected]
Geoff Earl +61 3 8608 2531 [email protected]
MinterEllison Foreign Bank Tracker 2020 30 minterellison.com