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How Asian banks are disrupting our lending market

 

by Matthew Smith | 21 Apr 2016
The march of the Asian banks into the local lending market has continued, with infrastructure among the most targeted projects for Japanese lenders, according to Nathan Collins, King & Wood Mallesons banking and finance partner.

Japan’s biggest lenders now rank in the top three arrangers of syndication deals for the three months to the end of March, Collins points out.

Mizuho Bank, Bank of Tokyo Mitsubishi and Sumitomo Mitsui have all been busy making up the top three positions this year for local syndication deals.

National Australia Bank, Commonwealth and Westpac rank sixth, seventh and eighth this year for arranged syndication deals by comparison, Collins says.

In corporate and property finance overall the big four Australian banks still dominate the local landscape, he adds.

Chinese banks are growing their loan books in Australia too — institutions including China Construction Bank, Commercial Bank of China have all been expanding their footprints in Australia.

While the Japanese banks have been big financiers of LNG projects in the past and infrastructure deals more recently, Chinese banks are following a different past and have grown first through the mining sector and more recently through property construction and land development, he points out.

Collins says this year Chinese and Japanese financial institutions combined have passed US Banks in terms of the size of the assets they manage in Australia.

#5 asianbanks.jpeg

The rise of Asian banks in Australia has been taking place over several years, according to Peter Cai, a research fellow with the Lowy Institute.

He says the first wave of Chinese banks came into Australia from 2007 onwards financing multi-billion dollar deals in the coal and iron ore segment at a time when US banks began feeling the effects of the global financial crisis.

Cai says the second wave of predominantly state-owned Chinese finance institutions started lending in Australia by investing in commercial and residential property developments.

Chinese banks have been following their clients into Australia and making a big splash on the back of construction and property development activity here… they are financing a lot of jobs in construction and in the professional services sector.

While Chinese lenders might have previously taken deal risk and developments themselves, the recent wave of lending has seen more partnerships with local institutions, King & Wood Mallesons’ Collins says.

While the Australian market is quite small on a global scale and has a limited number of deals, Collins says Asian lenders are attracted to the relative safety of the assets enabled by regulatory and reporting standards.

He points out the competition created by Asian firms expanding has turned what should be a lenders market into a borrowers’ market for loans.

“Given the consideration of margin compression associated with loans combined and with the cost of capital going up you’d expect this to be a lenders’ market but it’s the other way around,” he says.


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