Asian banks face tough competition
Asian banks face tough competition
SINGAPORE (AFP): Asian banks face fierce competition in
attracting deposits as a result of the regional financial crisis,
which has forced them to streamline operations, a poll of 50
banks in seven economies showed.
The banks will become less differentiated in their choice of
customers, products and approach to delivery of services,
according to survey results issued Sunday by Singapore-based
research and publishing company Asian Banker Journal.
"Across the region, banks that previously had very different
franchises are beginning to all want to compete in the same
areas," said Carol Wheatcroft, a senior researcher and co-author
of the survey report covering Hong Kong, Indonesia, Malaysia, the
Philippines, Thailand, Singapore and Vietnam.
"We especially found many middle market or corporate banks
saying that they wanted to compete for retail deposits, which
will increase the competition in this area," Wheatcroft said.
The survey, the first of its kind in the region, had sought to
determine the impact of the financial crisis on bank strategy and
technology in Asia, especially business plans and budgeting
priorities.
The Asian financial crisis broke out in mid-1997 when
currencies began sliding rapidly against the U.S. dollar. It hit
the financial sector and other key sectors and slammed the brakes
on the region's rapid economic growth.
"As an immediate reaction to the crisis, the survey shows that
financial institutions have put forth a defense business strategy
by shrinking expenditures and consolidating operations," said
Emmanuel Daniel, editor-in-chief of the Asian Banker Journal and
the other author of the report.
The banks said in the survey that apart from attracting retail
and corporate deposits, the other "greatest competition" areas
were in corporate lending, trade finance, credit cards, cash
management and third party funds.
The poll, which examined spending among banks in the region on
information technology (IT), also showed they were not investing
adequately in building their technology infrastructure.
"The survey benchmarked IT spending against the 1997 annual
results of international banks in developed countries, and found
that on average, Asian banks do not spend enough on IT to
leverage their competitive advantages," the survey report said.
Banks in Singapore and Hong Kong have the highest IT spending
levels per employee in the region while in Thailand and
Indonesia, which have large and inexpensive labor pools, the
impetus to invest in technology was seen as not very strong.
Bank spending on IT as a percentage of shareholders' equity
drew a "remarkably different" picture, with specific banks in the
Philippines, Indonesia and Malaysia spending a relatively high
percentage compared to their counterparts in Singapore and Hong
Kong.
The survey found that the average IT spending as a percentage
of shareholder equity for banks in the region surveyed is between
1 percent and 4 percent.
Major European and American banks benchmarked in the survey
spend double the amount, clearly indicating that if Asian banks
want to be competitive in the future, they cannot afford to lag
behind in their IT investment, Asian Banker said.