Ample liquidity to keep loan spreads tight in Asia, says ING
Group to focus on business strengths amid challenge to solid income growth in Asia
Lending margins will remain compressed in Asia for the next six to 12 months, said Mark Newman, the chief executive of ING Commercial Banking Asia.
Spreads between cost of funds and lending rates were generally tighter in Asia than Europe, Newman said, because of the flush of liquidity, as financial institutions in the region were not as severely affected by the financial crisis and local banks were lending aggressively to build their businesses.
"This will drive a continued spread compression in Asia in the short term," he said, but ING would not be much affected in the medium to longer term since "a significant part of revenues in Asia comes from non-lending operations".
ING is present in 14 markets in Asia, five of which it classifies as "key" markets. These are Hong Kong and mainland China (viewed as a single market), Singapore, South Korea, the Philippines and Japan.
The group employs 900 in the region and Newman said it would not be taking an aggressive approach to new hires and he expects no major change to overall staff numbers.
Rather than seeking to provide all banking services, Newman said ING would focus on its strengths, such as helping corporate clients enter markets in Europe and Asia, specialised sector lending, and structural finance. He also anticipated a growing demand for asset management and fund services in Asia.
Commercial banking in Asia represented 12 per cent of the group's pre-tax profit from commercial banking last year.
Hong Kong and mainland China are the major contributors to revenue and income in Asia. The group has offices in Shanghai and Beijing and holds a 13.64 per cent stake in Bank of Beijing.
Income from Asia has grown at an annualised rate of 25 per cent in the past five years. While he would "love" to see such growth rates continue, however, Newman said increasing regulatory requirements globally and in local countries would present a challenge to such growth.
"We have to adapt and strive for balance. This is something the whole industry is facing," he said.
The gradual liberalisation of the yuan presented opportunities, he said, and since the group had a strong network in Europe, it was in a good position to introduce customers to yuan business.