3013 Bloomberg Banking Outlook

7/29/2019 3013 Bloomberg Banking Outlook

http://slidepdf.com/reader/full/3013-bloomberg-banking-outlook 1/4

///////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////

BANKING//////////////////////////////////////

Q1 2013

Compared to the U.S., where growth is slowly returning, and Europe, which remains in the midst

o de-leveraging, Asia has enjoyed a period o considerable growth. As a consequence, the region’sbanks ace very dierent challenges in 2013 to those conronting institutions in the West.

The issues acing Asia’s banks in the coming year vary greatly by country due to diering easingcycles, regulatory standards, protability levels and economic conditions. However, two areas ocommonality stand out: net interest margins and credit booms.

Falling Net Interest Margin Development Across Thai, Malaysian and Singaporean Banks

NET INTEREST MARGINSNet interest margin weakness has been a eature o 2012 across a numbero bank systems in Asia including Korea, Australia and Singapore. While thespecic drivers varied rom country to country, the trend was caused largely

by rising unding costs and alling interest rates.

KEY THEMES » Net Interest Margin

Weakness Abates –Re-pricing, lower wholesaleunding costs, deposit costpressure slows.

» Bad Debt Rises as LoanGrowth Slows – Slowingeconomies, slower loan basegrowth drive NPL ratios higher.

» European Retrenchment =M&A, Growth – Lost Capacity,

New Deals.» Divergence as Credit BoomsSlow – Good vs. bad booms.

» Capital Goals Drive Payouts –Asian dividend yields varyby country.

» Asia FICC & OffshoreMarkets Flourish – DBS citeswatershed year.

///////////////////////////////////////////////////////////

///////////////////////////////////////////////////////////



///////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////

BANKING//////////////////////////////////////

Q1 2013

With rates alling or reaching historic lows, pressure is

being placed on bank earnings at a time when loan growthis also slowing, leading some banks to consider repricingtheir loans and backbooks.

In 2013 net interest margin weakness should abate with theavailability o cheaper wholesale unding, easing pressureon deposit costs and lessening the need or repricing.Already in Q4 2012, margins or Australian banks arefattening out Banks will also look to increase earningsby looking or alternative routes o growth, diversiyingaway rom net interest income and loans. Corporate bondissuance is expected to grow signicantly in Asia, with DBSstating 2012 was a watershed year and much was to come.

Australian Banks’ Pressure to Use Less WholesaleFunding Started a Deposit War

Singaporean Banks Have Suered Margin Erosion Since 2008-9European Banks Continue to Retrench, Reducing Asian Exposures

Record 2012 Asian Bond Issuance Sets A High Bar For 2013

Korea Epitomizes Margin Pressure With 6 Consecutive Lower Quarters



///////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////

BANKING//////////////////////////////////////

Q1 2013

Margin pressure should also ease as the withdrawal o

European banks rom the region continues. Lending byEurope’s banks in Asia has allen by $75bn over the past12 months and should continue to all in 2013, loweringcompetition and opening up capacity or Asian banks.

CREDIT BOOMSWhile net interest margin rates may still impact somecountries in 2013 the problem should not be as bad asin previous years and much o the impact o rate cuts hasalready been elt. A more signicant problem or some othe region’s banks could be slowing growth, which has thepotential to turn credit booms—such as that taking place inThailand—bad.

According to IMF research one third o credit booms endin a banking crisis while three quarters end with slowergrowth or next six to seven years.

With not every boom ending in a bust, the challenge orthe year ahead includes separating the good booms romthe bad. Credit booms are most likely to go bad in middleincome countries, according to IMF and World Bank data.

Domestic credit-to-GDP comparisons can be used to measurepenetration, but the absolute number alone is oten not asucient marker once it is above 60-70%. Oten o equal orgreater importance is the last evolution o the gearing. How

the country got there and how quickly is requently whatmatters, with the IMF’s measure o a bad credit boom beingthree consecutive years o 15%-plus jumps.

Global Domestic Credit Leverage –Leaders and Laggards

Middle Income Countries Are Most Susceptible to Credit BustsU.S. Credit Penetration is High Yet Stable, SuggestingNo Boom-to-Bust Issues Imminent

How to Tell i a Credit Boom will be Followedby a Bank Crisis and Economic Bust



BANKING//////////////////////////////////////

> > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > >

BEIJING+86 10 6649 7500

DUBAI+971 4 364 1000

FRANKFURT+49 69 9204 1210

HONG KONG+852 2977 6000

LONDON+44 20 7330 7500

MUMBAI+91 22 6120 3600

NEW YORK +1 212 318 2000

SAN FRANCISCO+1 415 912 2960

SÃO PAULO+55 11 3048 4500

SINGAPORE+65 6212 1000

SYDNEY+61 2 9777 8600

TOKYO+81 3 3201 8900

bloomberg.com

The BLOOMBERG PROFESSIONAL service, BLOOMBERG Data and Bloomberg Industries (the “Services”) are owned and distributed by Bloomberg Finance L.P. (“BFLP”) in all jurisdictions other than Argentina, Bermuda, China,India, Japan and Korea (the “BLP Countries”). BFLP is a wholly owned subsidiary o Bloomberg L.P. (“BLP”). BLP provides BFLP with global marketing and operational support and service or the Services and distributes the Serviceseither directly or through a non-BFLP subsidiary in the BLP Countries. Certain unctionalities distributed via the Services are available only to sophisticated institutional investors and only where the necessary legal clearance hasbeen obtained. BFLP, BLP and their alia tes do not guarante e the accuracy o prices or inormat ion in the Servic es. Nothing in the Services shall constitut e or be construed as an oering o nancial instruments by BFLP, BLP or theiraliates, or as investment advice or recommendations by BFLP, BLP or their aliates o an investment strategy or whether or not to “buy”, “sell” or “hold” an investment. Inormation available via the Services should not be consideredas inormation sucient upon which to base an investment decision. BLOOMBERG, BLOOMBERG PROFESSIONAL, BLOOMBERG MARKETS, BLOOMBERG NEWS, BLOOMBERG ANYWHERE, BLOOMBERG TRADEBOOK,BLOOMBERG TELEVISION, BLOOMBERG RADIO, BLOOMBERG PRESS and BLOOMBERG.COM are trademarks and service marks o BFLP, a Delaware limited partnership, or its subsidiaries.©2013 Bloomberg L.P. All rights reserved. 52082441 0213

BED DEBT

A urther issue related to slowing loan growth in 2013 isthat it could exacerbate bad debt increases i it is drivenby slower GDP growth and higher unemployment. Whilethe loan base is growing a rise in bad debts can oten beabsorbed, but as soon as loan growth slows bad debtratios can rise rapidly.

Korea Shows How Slowing Growth Can Forewarn o Rising Bad Debt

Capital is Key – Healthy Dividend Payout Suggests Strong Capital Base

CONCLUSION» Net interest margin weakness should abate in 2013 due

to lower wholesale unding costs, consequent lower

competition or deposits and impact o repricing» Credit booms bring the risk o slower growth with some

ollowed by banking troubles. Hong Kong and Thailandhave seen signicant leverage increases

» Slowing loan growth combined with higher

unemployment and lower GDP growth could

exacerbate bad debt increases, so much dependson macro-prudential policy

3013 Bloomberg Banking Outlook

Documents

Transcript of 3013 Bloomberg Banking Outlook