FiNETIK – Asia and Latin America – Market News Network

Asia and Latin America News Network focusing on Financial Markets, Energy, Environment, Commodity and Risk, Trading and Data Management

BANORTE buys IXE’s Afore (Pension Fund) business and lists ADR’s as part of it’s Global Expansion startegy

BANORTE (the only remaining 100% Mexican owned bank) is continuing with it’s global expansion strategy. After listing it’s shares on the Spanish / Latin American stock exchange LATIBEX on June 9th and ADR listing in the US Pinksheet OTC market, it acquired the pension fund (Afores) portfolio of IXE bank extending it’s Afore portfolio to 3.5 million accounts. In February 2009 it signed an cooperation agreement with China Development Bank,giving both banks access to bank payment and transfer service in México, China and the USA. (Note by FiNETIK, 11.06.2009)

MEXICO CITY, June 10 (Reuters) – Banorte, one of Mexico’s top banks, said on Wednesday it has agreed to buy a pension fund business from a smaller rival and that it listed its stock on the U.S. over-the-counter market.

Banorte’s (GFNORTEO.MX: Quote, Profile, Research) Generali unit will absorb Ixe’s (IXEGFO.MX: Quote, Profile, Research) 312,489 pension clients, whose combined accounts are worth 5.45 billion pesos ($399 million).The transaction is subject to approval from Mexico’s competition agency. In Mexico, workers in the private sector save for their retirements in pension funds known as Afores.

With this acquisition Banorte will be ranked 4th in Mexico’s Afores account holding, managing a total 3.2 million pension account. (El Universal, 11.06.2009)

In a separate announcement, Banorte said it had listed its stock through pink sheets (GBOOY.PK: Quote, Profile, Research) in the U.S. over-the-counter market. Companies sometimes tap this less-regulated market before leaping into a larger exchange.

Banorte sees the over-the-counter market as a possible prelude to listing its ADRS on the New York Stock Exchange, a bank source told Reuters.

Only a handful of Mexican companies, like tycoon Carlos Slim’s telecom giants America Movil (AMX.N: Quote, Profile, Research) or Telefonos de Mexico (TMX.N: Quote, Profile, Research), trade their American Depositary Receipts on big U.S. markets with healthy liquidity.

Some Mexican corporations have withdrawn their shares from U.S. markets in recent years to avoid tighter scrutiny from U.S. securities regulators.

Source: Reuters, 10.06.2009, Banking News (ADR Depository), 11.06.2009

Filed under: Banking, Latin America, Mexico, News, Services, , , , , , , , , , , , , , ,

Fitch expresses concern about China’s loan cascade

The ratings agency points to early warning signs that indicate asset quality is deteriorating.

This year, China’s banks have opened the floodgates of credit: between January and the end of April, $757 billion worth of new loans were dished out, equivalent to 17% of the GDP in 2008. As such, China’s banks are enjoying a rate of growth that their Western peers would kill for. The increase in lending is the government’s doing, since it has given banks the task of financing the infrastructure spending that forms a large part of China’s stimulus package. Read original article.

Looking to the medium- to long-term, however, analysts are beginning to air concerns about what effect such a rapid increase in lending could have on the quality of the banks’ loan portfolios.

A report released yesterday by Fitch Ratings highlights issues with the banking sector’s $4.2 trillion corporate loan portfolio. The worry arises from the fact that China’s banks are increasing their corporate exposure at a time when corporate profits are declining.

“Ordinarily, falling corporate earnings are met with tightened lending, but in China precisely the reverse is happening,” said the report. This illustrates that “despite years of reform Chinese banks still retain an important policy function in upholding local enterprises”.

Infrastructure spending is not the only thing underlying the loan growth, according to the report. All the banks set a profit growth target. Since interest rates are down, the only way that banks can possibly meet their targets is by focusing purely on volumes. In the process of increasing the number of loans, it is more likely that money will be lent to commercially unviable projects. However, the banks don’t see this as a problem, since there is an implicit assumption that any coming losses will be paid for by the government.

Although bank earnings have held up well so far, Fitch points to what it calls “early warning signals” that indicate asset quality could be deteriorating.

One sign is that the banks are increasing the assessment rate for how much money should be kept aside for losses against unimpaired loans, which suggests that they expect greater losses to come from the loans that are currently considered performing. The banks are also reclassifying more special mention loans, a category of weak loans just one step from being a non-performing loan (NPL), into NPLs. Finally, the foreign banks, which have better risk management systems than the local banks, saw a rise in their NPLs in the first quarter.

But the full extent of the problem of future credit losses may not come to light for some time, for several reasons, said the report. The structure of corporate debt is such that the inability of the borrower to pay will not become apparent until the principal is due, which will often be years after the loan was made. Furthermore, it is a common practice in China to roll over loans by extending the maturity, which in effect postpones the bad news and allows the loan to remain classified as adequate.

Source:, 23.05.2009 by  Daniel Inman

Filed under: Asia, Banking, China, News, Risk Management, Services, , , , , , , , , , , , , ,

Using IT to Survive Mergers and Acquisitions in a Challenging Economy

Few industries have been affected more by today’s economic downturn than the financial industry. Many financial institutions have been forced into consolidations and mergers, requesting government assistance just to survive. They are pressured to show revenue increases and cost reductions almost immediately, and depend heavily on IT to meet these demands.

First, however, IT departments must successfully integrate the merging companies’ respective technology investments. In today’s economy, large IT budgets and staff are no longer considered assets. If financial companies are going to survive, their IT departments must reduce costs and make their remaining resources as efficient as possible, while ensuring consolidation tasks are accomplished smoothly and safely.

Challenges of a Merger or Acquisition
The scope of the challenges faced by IT in financial industry M&A are unprecedented in today’s economy. Not only must the IT team support demands for “as-fast-as-possible” increases in revenue and reductions in costs, they must accomplish this while meeting the extensive access control, auditing and reporting, and transparency requirements of many new legislative and industry rules and regulations—often, despite downsizing and budget cuts.

Differences in the two organizations’ cultures, business processes and technology platforms can pose huge internal and external risks to security and compliance posture. Intruders may try to take advantage of internal instability, inconsistently-implemented policies and the general chaos of change. Disgruntled employees can pose an internal security risk, as well.

Another security threat during a merger or acquisition comes from messaging and collaboration. E-mail is probably the definitive business-critical IT resource since virtually every business process depends on the availability, integrity and performance of messaging services, as well as collaboration tools like scheduling and calendar applications. Integrating them improperly can open significant gaps in security and compliance, exposing the business to risk from users who should not have full access permissions.

Identity and Access Management
The biggest, most critical challenge posed by M&As is the handling of identity and access management, which defines access rights and privileges throughout the enterprise. Identity and access management plays a central role in maintaining security and is key to assuring the proper handling of customer information. It is the fundamental technology for assuring the enforcement of IT resource access policy. Many organizations maintain a directory system for managing user identities and access privileges. Directories also are used to manage system configuration and access control for resources throughout the enterprise, including servers, file systems, desktops and printers.

Some businesses also use Lightweight Directory Access Protocol (LDAP) directories, as well as databases, to manage user and resource identities and access control. It is vital that rationalization of identity and access management across the merging companies be undertaken with great care. Not only can mishandled identity cause security issues, but identity management breakdowns can take multiple business processes down with them. Combining the two identity management systems requires solutions that recognize and solve the challenges of identity resource integration, including directory interoperability and migration.

Maximize Efficiency
Security, compliance, and identity and access management are just a few of the important issues IT must address during a merger of two financial institutions. Today, those challenges are compounded by the need to quickly create more business value for the institution. There are several ways IT can maximize its own business value, however, and add to the institution’s bottom line. Since IT faces diminished budgets and lowered headcounts, it must reduce department waste and make remaining resources more efficient for the bank to succeed. This can be done several ways:

  • Ease migration challenges by finding a solution that enables competing systems and applications to communicate effectively with each other
  • Eliminate redundant effort by combining resources and automating platform management where possible.
  • Reduce time required for repetitive tasks by automating wherever possible.
  • Reduce excessive expenditures by quickly consolidating the two institutions’ IT toolsets; select best-in-class solutions to provide the biggest positive impact both on IT operations and the business’ bottom line. Also consolidate and reallocate server resources where possible to reduce unutilized server capacity.

It’s possible to actually do more with less by creating a leaner, more efficient set of IT resources—an essential step when combining IT operations. Specific ways to accomplish this include:

  • Consolidation: Consolidate redundant systems and file servers to reduce IT’s internal overhead. Also reduce the number of directories and consolidate the rest into a less complicated infrastructure design. Consolidate non-Windows directories into Active Directory whenever possible.
  • Automation: Use software that handles the most repetitive tasks, especially those performed across different systems.
  • Compliance: Use solutions that address the various aspects of compliance throughout the environment. Consider enterprisewide compliance. Also, create a single configuration control system by implementing configuration controls to extend across platforms. Align access controls to business objectives instead of technologies or platforms; implement change control and auditing on configuration control systems such as Group Policy; and establish a configuration baseline for operating system configurations across the enterprise.
  • Audit and Track: Everything! Consolidate native event logs from Windows, Unix, Linux, Active Directory, Exchange, databases, firewalls and everything else into a single, centralized, tamper-proof database. Use reporting tools to turn the data into the reports auditors demand.
  • Maintain Availability: Besides files, folders, e-mail and databases, back up Active Directory, Group Policy and other “command and control” technologies regularly and automatically. Place them under change and version control when possible, and keep them thoroughly audited to maintain full availability of your IT resources.

Choose solutions tailored to the specific requirements of the consolidation. They should enable different resources in both institutions to interoperate without requiring significant re-engineering of existing solutions. Tools that make efficient use of limited IT personnel and resources can help the IT staff manage and maintain the infrastructure in less time and with fewer budget dollars, which will maintain system security and allow the new blended financial institution to meet the quick turnaround demands for reduced costs and increased revenue.

May 18, 2009

Filed under: Banking, Data Management, News, Risk Management, Standards, , , , , , ,

Risk managers unconvinced by single global regulator – survey

MPI Europe, in association with the FS ThinkTank initiative, has published the results of a recent industry-wide survey on risk management within the financial sector.

The survey shows that financial leaders acknowledge that greater regulation is needed to restore confidence and address shortfalls in behaviour. However, they remain unconvinced about the benefits of a single global regulator, preferring instead a more direct approach to resolving risk issues that involves practical solutions across people, culture, process and technology.

The survey was aimed at directors, CXOs and senior level executives with responsibility for risk management and showed that most respondents accept that the recent financial crisis was amplified by a short-term outlook and a lack of focus on longer-term, underlying issues concerning financial risk. 83% of respondents agreed or strongly agreed that business priorities had shifted too far to the short term and more than 70% saw the use of similar pricing and risk models across many firms contributed to market volatility.

When asked about future risk management strategies, it was clear they felt there should be a greater emphasis on risk management, yet lack of staff with the right skill set may hinder progress in this area. More than 75% of respondents felt that a shortage of appropriately skilled people will slow down the progress in risk management.

The survey identified that the reality of the current market means that there should be a greater emphasis on a wider range of risk scenarios, even those previously viewed as unlikely, but that recent experience has shown are possible. One of the strongest findings from the survey was the need to promote a risk management culture across all departments and shift the emphasis more from trading to risk functions. It was also agreed that senior management should have greater involvement in risk analysis, including the identification of risk and the implementation of risk strategies, however there were mixed responses about mandatory sign-off of risk functions by senior management.

To help evaluate risk more effectively, vely, respondents felt that better data quality would help to improve the identification of risk across all financial transactions. To obtain this level of data quality, respondents identified the need for better enterprise-wide management tools and techniques.

John Cant, Managing Director of MPI Europe comments: “Clearly our financial leaders understand the weaknesses within the previously accepted market norms for risk management and are keen to work quickly to resolve some of them. Therefore simply waiting for a unified regulatory approach may reduce the speed by which financial organisations can address the risk management issues which are important for stability and survival in the current volatile environment. There is a need to formulate more robust risk management strategies sooner rather than later.”

The Risk Management Survey was conducted as part of FS ThinkTank and is supported by Sun and Computacenter.

Source: Bobsguide, 13.05.2009

Filed under: News, Risk Management, Services, , , , ,

Mexican banks choose SunGard for operational risk management

Following recent regulatory changes in the country, a group of Mexican banks have signed up for SunGard’s operational risk management technology.

Invex Servicios Corporativos, DE CV Invex Grupo Financiero, Banco Regional de Monterrey, Institución de Banca Múltiple, Banregio Grupo Financiero, Banco Monex, Institución de Banca Múltiple, Monex Grupo Financiero, Banco Autofin Mexico, Institución de Banca Múltiple and Banco ve por Mas, have all signed for the vendor’s Ambit Risk & Performance platform.

SunGard says Ambit will help the banks identify, quantify and manage operational risk as well as comply with Basel II regulatory requirements. The system will provide them with enterprise-wide loss event tracking and management reporting tools to improve operational efficiency and control risk exposure.

Ana Cecilia Reyes Esparza, president, OpRisk Committee, Mexican Banks Association, says: “We believe that by adopting better operational risk principles and practices, we can manage our economic capital more efficiently. SunGard’s Ambit Risk & Performance solution provides a platform to help us accomplish this.”

Source: SunGard, 08.05.2009

Filed under: Banking, Data Management, Mexico, News, Risk Management, , , , , , , , , , , , , , , , ,

VaR: Should we abandon it?

In the on-going financial crisis, it seems that the value-at-risk (VaR) approach to risk management has failed miserably. For example, Merrill Lynch reported 2007 year-end daily trading VaR of $157 million, including US sub-prime and other residential mortgage products. But the reported VaR had no relationship at all to the bank’s subprime loss in 2007, and which, by January 2008 had reached a stunning $24.5 billion. There has been no shortage of critics of VaR ever since the concept was introduced and the voices against it are getting louder.   Click here to read the full story

The concept of VaR arose as a result of searching for an aggregate measure of risk. In 1980s, facing increasing market volatilities, financial firms started setting up risk management groups and tried to find ways to aggregate the firm-wide risk. In 1985, JPMorgan developed the first system of VaR, which measures a portfolio’s maximum potential loss over a horizon with a given confidence level. In the 1990s, VaR became very popular among financial institutions, as well as investors.

The following article is contributed by Yu Zhu, professor of finance, China Europe International Business School and former director, modeling and analytics group, Merrill Lynch

Source: The Asian Banker, 06.05.2009

Filed under: Asia, Banking, China, News, Risk Management, , , , ,

No Swine Flu Emergency Yet, but Banks Should Keep Eyes Open

James Kerr says it’s better for banks to be safe than sorry when it comes to building pandemic-related contingency plans—and Y2K-type backup plans are insufficient.

The swine flu scare hasn’t reached pandemic proportions at this point. However, that hasn’t stopped people and the markets from panicking slightly. Just today, someone working for Ernst & Young in New York was reported to have had swine flu. And stocks are still a little jittery as news of the scope of the disease continues to be broadcast.

“It doesn’t take much to get a reaction out of the market during these uneasy times,” James Kerr, president and managing partner with Cromwell, Conn.-based Best Practices Enterprise Group, told BS&T. “It’s unfortunate that the markets reacted to this because these isolated outbreaks have had little impact on business throughout the world. If it reaches pandemic proportions, yes, some businesses will be in jeopardy. But, as of the moment, calmness should prevail as businesses do what they need to do to prepare for contingency operations.”

Although it’s not yet time to push the panic button, it is still important for banks to monitor something like the spread of swine flu closely and to take stock of their disaster recovery plans. Today’s situation is reminiscent of what happened during the bird flu scare just a few years ago, Kerr comments. “I don’t see any major differences in the way businesses have reacted to this compared to the bird flu scare. Most firms took little action then. I don’t think this scare will make them take any more action now.” This kind of complacency can be dangerous. Kerr senses some banks might think the contingency plans they developed to handled Y2K, for example, are adequate. This is not the case, he asserts, since the steps a bank would take in the event of mass computer outages differ greatly when compared with what must be done if workers are unable to report to the office. “A few years ago many firms built contingency plans to handle a Y2K catastrophe scenario, such as electrical outages, water outages and transportation problems. So, they think that they can just dust those business continuity plans off if a pandemic strikes. But, here again, the Y2K scenario and what you do about it is much different than one where workers can’t work. Certainly, many organizations have done it right and have built pandemic-specific business contingency plans. But, many others have not.”

Based on what he has seen from the research, Kerr is inclined to believe it isn’t a question of “if” but “when” when it comes to a worldwide flu pandemic. “The problem is most of us choose to ignore these kinds of warnings and most of the time we do just fine,” he comments. “But, I advise my clients that it is far wiser to make an investment in planning for this (even if it never happens) because the cost of planning is a lot less than the cost to the business if it gets caught without a plan.”

Source: Bank System & Technology,

Filed under: Asia, Banking, Latin America, Mexico, Risk Management, , , , , , , , , ,

Is Mexico’s New Banking Bill a sign of worse things to come in International Banking Regulations?

A proposal to regulate fees charged by banks operating in Mexico won’t put a big dent in Bank of Nova Scotia’s (BNS) bottom line, but it could be a sign of worse things to come, as banking rules around the world begin to tighten in the wake of the financial crisis.

Brad Smith, Blackmont Capital analyst said:

As of the year-end 2008, Scotia’s Mexican operations were responsible for 9% of total earnings and while this legislation could impact on Scotia’s total operations to be marginal at this time.

The greater concern, in our view, is that this is merely an initial step in increased international regulation of the financial industry, thereby putting increased strain on future profits.

The new banking bill passed by the Mexican Senate, but still required to pass through the lower house, proposes ceilings on credit card and loan interest rates and also seeks to regulate deposit rates and eliminate certain banking fees.

Mr. Smith continues to rate Scotiabank shares a “hold” and left his C$36 price target unchanged.

Source: SeekingAlpha, 23.04.2009

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Asia: Survey sees softer growth in wealth management revenues – BarCap

The industry’s bright spots are China and India, which are viewed as the most attractive markets in Asia.  See Barcleys Capital Wealth Management Report 2009

Revenue growth in Asia’s wealth management industry is expected to soften significantly during the next two years, according to a Barclays Capital survey of Asia’s leading wealth managers who between them have more than $5 trillion of assets under management.

The wealth management survey involved 123 respondents from 53 wealth management organisations in seven countries across non-Japan Asia, including asset managers, insurance companies, local and global retail banks and private banks.

In last year’s survey, around 90% of wealth managers expected revenue growth in Asia of more than 5% per annum in the coming two years, while only 41% of respondents expect such growth in this year’s survey. Worse news still, this year 18% anticipate negative returns.

China and India continue to be viewed as the most attractive markets in Asia, both in terms of potential for business expansion and for their expected revenue growth rate. A majority of wealth managers see China as the most attractive market, with a quarter of them still forecasting the country to generate revenue growth of more than 15% per annum during the next two years. Next in line is India, with a fifth of respondents still anticipating such growth.

Korea is viewed as the least attractive market in Asia, with 29% of wealth managers forecasting negative revenue growth.

This is not a surprising result, as many banks, in anticipation of lower revenues, have cut back their global wealth management staff. And Asia has not been spared.

Challenges and strategies

The key challenge facing wealth managers is how to adapt to the changing regulatory environment. “It is evident that wealth managers share the view that the financial markets will operate under significantly different regulatory conditions in future,” says Kevin Burke, head of distribution, Asia-Pacific at Barclays Capital.

Capital protection continues to be the most common product strategy. Thematic investments dropped from the second most popular product strategy last year to sixth this year, reinforcing the continuing client trend towards simple and transparent products.

The three most important product features for clients are considered to be issuer risk, capital protection and a short maturity. This is a significant shift in investor attitudes away from liquidity and growth, which have typically dominated over the past three years.

“Evidently, risk aversion is currently top of mind for investors, as demonstrated by the great importance they place on protecting their underlying capital, assessing issuer risk and short maturity products for investment flexibility,” says Peter Hu, head of non-Japan Asia investor solutions at Barclays Capital. “This risk aversion is also reinforced by a shift towards increased use of structured deposits,” he adds.

Wealth managers’ recommendations for a balanced-risk investor portfolio have an increased weighting in cash products and bonds over last year’s survey, at the expense of equities and commodities, which is in line with the trend towards capital protection. Looking ahead, a majority of respondents are expecting the allocation to non-Japan Asia equities within their balanced-risk portfolio to increase during the next six months.

The survey also shows that equity and FX remain the most popular asset classes for both flow and structured products. The use of equity has generally declined from last year as investors search for capital protection, and the use of structured products has declined across the board as investors search for simpler and more transparent products.

Source: 20.04.2009

Filed under: Asia, Banking, China, India, Korea, News, Risk Management, , , , , , , , , , , , , ,

HSBC Mexico Upgrades Its Core Banking Systems in One Big Bang

HSBC Mexico decided to upgrade its core banking applications in one shot, tapping CSC’s automated upgrade program to govern the implementation.

If a bank is going for a “big bang” core systems upgrade, it seems appropriate to launch the new systems on July 4, even if the bank is based in Mexico and its customers don’t celebrate the United States’ day of independence. Before Mexico City-based HSBC Mexico (HBMX), part of HSBC Group (London; US$2.5 trillion in assets) went live with new core applications on Independence Day in 2008, it had been using a mix of legacy versions of core banking applications from Hogan Systems, which was acquired by CSC in August 1996.

According to Arturo Rivera Fermoso, IT director, core systems, for HBMX, the aging software prevented the bank from leveraging state-of-the-art hardware. “In some cases, the oldest applications within our Hogan suite prevented us from fully using the new capabilities of our hardware system,” he relates. “For example, we were limited to batch processing on some functions but wanted to move to all real-time and achieve 24×7 availability.”

Still, HBMX approached the possibility of upgrading the heart of its operations with caution. “Our core banking applications are mission-critical, so we had chosen not to upgrade to current application versions until the benefits of the upgrade outweighed the cost and risk,” Fermoso says, adding that the bank decided to take the leap in 2006.

Click here to read full article

Source: Bank System & Technology, by

Filed under: Banking, Latin America, Mexico, News, Services, Trading Technology, , ,

Counter Party Risk Report April 2009 – Inside Reference Data

Download: Counter Party Risk- Report April 2009 – Inside Reference Data

The recent market turmoil has highlighted the need for improved counterparty data management, making counterparty risk a number one priority for firms. Inside Reference Data gathered leading industry professionals to discuss the importance of effective data management to mitigate counterparty risk in a web forum on March 30

Source: Inside Reference Data, April 2009

Filed under: Banking, Data Vendor, Exchanges, Library, Market Data, News, Reference Data, Risk Management, Standards, , , , , , , , , ,

HSBC Mexico Upgrades Its Core Banking Systems in One Big Bang

HSBC Mexico decided to upgrade its core banking applications in one shot, tapping CSC’s automated upgrade program to govern the implementation. To read full article click here.

If a bank is going for a “big bang” core systems upgrade, it seems appropriate to launch the new systems on July 4, even if the bank is based in Mexico and its customers don’t celebrate the United States’ day of independence. Before Mexico City-based HSBC Mexico (HBMX), part of HSBC Group (London; US$2.5 trillion in assets) went live with new core applications on Independence Day in 2008, it had been using a mix of legacy versions of core banking applications from Hogan Systems, which was acquired by CSC in August 1996.

According to Arturo Rivera Fermoso, IT director, core systems, for HBMX, the aging software prevented the bank from leveraging state-of-the-art hardware. “In some cases, the oldest applications within our Hogan suite prevented us from fully using the new capabilities of our hardware system,” he relates. “For example, we were limited to batch processing on some functions but wanted to move to all real-time and achieve 24×7 availability.”

Still, HBMX approached the possibility of upgrading the heart of its operations with caution. “Our core banking applications are mission-critical, so we had chosen not to upgrade to current application versions until the benefits of the upgrade outweighed the cost and risk,” Fermoso says, adding that the bank decided to take the leap in 2006.

Source: Bank Systems & Technology, b13.04.2009

Filed under: Banking, Mexico, News, , , , , ,

Asia: Investment banking revenues down, but not out

Net revenue generated by banks from core investment banking transactions in the Asia-Pacific region is down 25% to $1.3 billion in the first quarter from $1.7 billion in the same period last year, according to preliminary data from Dealogic, which tracks financial activity.

The drop is less pronounced than the 32% fall in global net revenue to $8.1 billion, and the 45% decline in the Americas to $3.4 billion. Indeed, as the market share held by the US has declined, the Asia-Pacific has increased its share and now accounts for 16% of global core investment banking revenue — up from a 14% share in the first quarter 2008.

Nomura leads the Asia-Pacific core investment bank revenue ranking with a 14% share — the Japanese bank also ranked first in the corresponding period in 2008 with a 9% share. Banking revenues in Japan were up 5% to $542 million, accounting for a 42% share of the market.

The dull spot is China, with a mere $80 million in investment banking revenues year-to-date, down 83% from this time last year. The country’s share in Asia-Pacific is a tiny 6.3%, not much more than Singapore’s 6%. Hong Kong isn’t looking much better, with just $13 million in investment banking revenue in the first quarter, down 68% from the same period last year and representing just 1% of the regional pie.

In terms of products, it comes as no surprise that equity capital markets (ECM) are suffering, with revenues down 75% in Asia ex-Japan, underscoring how much issuance has slowed particularly in China, Hong Kong and India. ECM is down just 39% if you include Australia and Japan and look at Asia-Pacific as a whole.

Nor should it raise too many eyebrows that the good news is to be found in the debt capital markets (DCM), particularly in Australia. If you include Australia and Japan, DCM revenues are up 67% in the Asia-Pacific, and that number stays high — at 65% — if you exclude Japan.

Challenging Nomura on the overall IB front is UBS, which leads the Asia-Pacific (ex-Japan) and Asia (ex-Japan) revenue rankings.

Dealogic defines investment banking revenue as comprising DCM, ECM and M&A transactions, including Chinese A-Shares. When actual fees are not disclosed, Dealogic determines the revenues using what it calls “revenue analytics”. Industry experts we spoke to about these rankings say the figures on bank revenues are “directionally accurate”. As one banker put it: “Banks looks directionally right but the numbers are potentially distorted by one or two deals and mis-estimated methodologies.” While that’s a fair point, unless banks announce their revenues down to the penny (and why would they?) this is a useful benchmark and one used by the banks for marketing.

Origingal Article here

Source: FinanceAsia, 30.03.2009

Filed under: Asia, Australia, Banking, China, Hong Kong, India, Japan, Risk Management, Services, Singapore, Wealth Management, , , , , , , , , , , , , ,

Asian expansion top priority for cross-border banking – Sungard

Beyond the home market: The future of cross-border banking – from the Economist Intelligence Unit (EIU) reveals that, despite a tough economic climate, a significant number of banks, particularly in emerging markets led by Asia, are continuing to pursue expansion into foreign markets. The research, which involved a survey of over 270 executives from banks and financial services companies around the world, was commissioned by SunGard to investigate key drivers and markets for cross-border initiatives.

Survey results indicated that ailing market conditions are contributing to an overall scaling back of growth in the West with an increased focus on customer centricity, risk and improved infrastructure. Firms are leaning on improved technology and systems to strengthen operations and bring order back to organizations that have experienced global and domestic growth at a staggering pace. However, while growth by Western banks has slowed, expansion in Asia and other emerging markets is still continuing. The survey also found that branch transformation, customer relationship management and integrated risk management will be the key focus areas for many banks in the near future.

Over 45% of respondents believed that their banks would enter or expand into new markets in the near future, with 40% stating that following global customers into foreign markets was the key driver for expansion. Over a third of those surveyed said that customer service would be critical to achieving and maintaining competitive advantage in new markets, followed by product innovation (30%), distribution (19%) and cost (14%). The research also showed a strong focus on risk management, with 57% of respondents stating that this would be the most important area when assessing IT infrastructure needs in new markets. Finally, Internet Banking (53%) was highlighted as the most popular channel initiative by banks in foreign markets, followed by ATMs (35%) and mobile banking (5%). However, respondents believe that mobile banking will become a critical channel to engage with customers in the next three years.

Manoj Vohra, research director and senior editor from the Economist Intelligence Unit, commented: “It is clear that broadening the customer base is an overriding reason for expansion into foreign markets, cited by 49% of respondents. It is no surprise that many are looking to grow their presence in Asia, where a large unbanked population and relatively unsophisticated financial services infrastnfrastructure offer a good potential return on investment.”

David Hamilton, president of SunGard’s banking business, commented: “We commissioned this study in order to better understand the changing requirements and growth strategies of our banking customers. There is increased focus on issues such as cost efficiency, operational integration and risk and regulatory compliance, but it appears greater clarity is needed on how to effectively address these issues. We believe SunGard can help to provide that clarity – for instance by offering technology solutions for key areas such as customer relationship management and profitability analysis.”

Source: SunGard, 31 March 2009

Filed under: Asia, Banking, Latin America, Library, News, Risk Management, , , , ,

Asia’s Private-Banking shakeout to intensify, says UBS

Asia’s private-banking industry will experience a “big shakeout” as the global recession saps investors’ appetite for risk and drives down fees, according to UBS AG. 

The Zurich-based bank, Switzerland’s biggest, and other firms will have to cut compensation, the biggest cost component of the business, said Tee Fong Seng, Head for Key Clients in Asia-Pacific at UBS’s wealth-management unit. Costs haven’t declined with revenue after the industry grew, “maybe a bit too aggressively,” in the last few years, he said. 

“There was a sense of optimism leading up to 2005, 2006, 2007, and things just received carried away,” Tee said today at an industry conference in Singapore. “The present business model of banking is not sustainable, it has to change. Revenue is coming down.” 

Assets under management at UBS’s private-banking unit in the region have fallen “substantially,” after growing to more than US$200 billion in 2007 from US$75 billion at the end of 2004, he said. 

The wealth-management industry is seeking to win back the trust of clients whose wealth has been eroded by global financial turmoil. Individuals worldwide with more than US$1 million probably saw the value of their assets shrink by about 20% to 25% in 2008, Stephen Wall, a London-based director at Scorpio Partnership Ltd, said in an interview. 

Cutting Edge 
In 2007, wealthy people’s assets rose 9.4% to US$41 trillion, while the total number of high-net-worth individuals rose 6%, according to the latest survey by Capgemini SA and Merrill Lynch & Co. 

Clients prefer “simple direct investments” in equities, bonds and precious metals, shunning “complex structured products” that pay higher fees, said Kwong Kin Mun, head of private banking in South Asia at Singapore-based DBS Group Holdings Ltd 

“When we go back to clients with terms like ‘innovation’ and ‘cutting edge,’ they are really viewed with suspicion and in some cases disgust,” Kwong said. “The credit crunch right now has developed into a kind of a revenue crunch and the whole industry is trying to find the right model.” 

If the “risk aversion” lasts for another nine to 12 months, it will have “tremendous impact on the wealth management industry,” Kwong said. “Most of us have built our models on a very bullish assumption.” 

High Costs 
Private banks competing to manage the region’s riches were recruiting senior bankers from their competitors as recently as two-years ago, leading pay to escalate. Private bankers will have to be “more realistic” in their salary expectations, UBS’s Tee said. 

Costs that were built up in the past were “well taken care of by the revenue generation,” he said. 

New York-based Morgan Stanley is trying to cut its “variable costs,” said Tan Su Shan, the bank’s head of wealth management in Southeast Asia and Australia. “We’ve come to realise that our fixed costs have been too high,” she said. 

Aggressive Strategy 
“Three or four-years ago, most of the industry players realised that excesses had built up, but none was brave enough to stand against this very strength,” said DBS’s Kwong. “Most, if not all, of the industry players continued to carry out a very aggressive growth strategy on the premise that perhaps Asia would take over the driver’s seat in world economic growth and therefore private wealth would continue to grow incessantly.” 

Financial institutions worldwide have reported US$1.3 trillion of losses and shed more than 286,000 jobs since the US subprime mortgage market collapsed, data compiled by Bloomberg show. 

“The modern wealth management market has never been through a decline like this,” said Scorpio Partnership’s Wall. “It’s been experiencing about 15 years of growth and it’s become a massively professional industry. Now it appears that all the professionalism didn’t work, it’s become a basic average man-on-the-street investor kind of process. Banks haven’t lived up to expectations.” 

Source: Bloomberg, 27.03.2009

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