World’s Best Banks 2021: Asia-Pacific

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The Best Banks in Asia-Pacific sped up digital efforts to meet the crisis.



For banks in the Asia-Pacific region (APAC), the onslaught of Covid-19 can perhaps best be characterized as an unprecedented externality that has served to expose—in stark relief—a twin-pronged dynamic of transformation and consolidation that had been in place before the pandemic emerged.


That dynamic gained momentum thanks to brutal economic contraction, shrinking margins, savage competition and crimped return on equity (ROE). It represents a swift acceleration of forces that had been steadily building prior to the pandemic, characterized by rapidly shifting customer expectations and behavior and hammered home at great speed in the face of lockdowns, social distancing and work insecurity.


Banks in APAC must now work harder for ROE, prompting many to focus on areas that have been relatively ring-fenced from the effects of the pandemic, such as investment banking, wealth management, high-end advisory services and insurance. Many have sought positive carry by moving down the credit curve and into higher-yielding segments such as project finance and unsecured lending.


Traditional incumbent banks might stare with fear at the onslaught of fintech and the competition it presents to traditional business models. In response, their only viable option has been to embrace this technological revolution, in many cases by investing in the upstart competition.


China, Hong Kong, Macau, Taiwan


China’s banking system has continued to build on the juggernaut momentum it has established over the past two decades, as its economy weathered the pandemic better than any of its big-league peers. Its state-led business model begins to appear unimpeachable, for the time being at least.


Versus the precipitous drops in profitability seen in the banking sectors of a swath of developed and emerging countries, thanks to the effects of the pandemic, China’s banking industry saw net profits decline by just 2.7% according to the China Banking and Insurance Regulatory Commission—a remarkable data point.


China’s state-owned giant ICBC (Industrial and Commercial Bank of China) slotted into this script, weathering the pandemic impressively in 2020, and takes the title of Best Bank in Asia Pacific and also Best Bank in China.


ICBC managed to grow total assets 11.17% in the nine months to September, with a return on weighted average equity of 11.95% achieved for fiscal year 2020, compared with 13.05% in 2019, an above-trend performance versus its peer group in the country.


The breadth and range of services provided by ICBC cannot but impress: The bank services 660 million retail customers and 8.5 million corporate clients and strives, according to its own mission statement, to be “a craftsman in large banking.” International reach encompasses 49 countries, with a signal presence across Africa via its majority shareholding in the Standard Bank Group, and it boasts a vast array of correspondent banking relationships, totaling almost 1,500.


The bank enhanced its service capability last year, reporting the establishment of an “online, traceable and door-to-door” service model across the board; and the “ICBC e-Confirmation Service” product, to meet the demands of stay-at-home customers, all leveraged by cloud computing and a range of cutting-edge financial technologies within an “open, integrated crossover biosphere.”


ICBC’s corporate culture is highly attuned to environment, social and governance (ESG) demands, with the promotion of inclusive finance, poverty alleviation and the protection of the environment and natural resources underpinning its business activities. Last year, the “ICBC Charity Chain” was developed using blockchain technology, providing nearly 200 charitable organizations with integrated services. Covid-19-related financial assistance was provided via products such as the “Antiepidemic Loan” with the aim of alleviating the strain on small and midsize enterprises (SMEs).


In Hong Kong, many banks struggled to maintain profitability from their core commercial and retail franchises within the city state in the face of the pandemic.


The Bank of East Asia bested the competition, managing a full-year profit for 2020 of 3.6 billion Hong Kong dollars ($463 million), for an 11% increase on the previous year, when profits had slumped to their worst in a decade.


The family-run bank reorganized its operations in mainland China—where solid revenue and profitability balanced out the inauspicious business background within Hong Kong—and addressed lingering nonperforming loans (NPLs) last year, key to its solid turnaround in 2020.


Meanwhile, once again ICBC Macau demonstrated the fecundity of the former Portuguese colony as a place to do business, pulling in 10% profit growth, boosting assets by 15% and growing market share by 1% to 18% of Macau’s commercial and retail banking market, facilitated by the bank’s newly established dual-license operating structure.


CTBC remains a standout in Taiwan in terms of revenue, profitability and capital scale, having achieved a solid 8.8% ROE in 2020 and enjoying 13.5% growth, all in the face of challenging business conditions, not least the reduction in Taiwan’s short-term policy rates last year.


The bank has a diversified revenue base via its overseas presence in 14 countries and devised an innovative methodology it calls “power curve origination,” which uses a multiplicity of variables to assess financial risk. The bank led the way in terms of the Covid-19 response in Taiwan, approving more than 7,000 loans under the government’s pandemic relief program.


Australasia


Commonwealth Bank of Australia (CBA) can lay claim to the status of leading fintech-oriented bank in the country, with the CommBank app processing 1.2 billion of Australian dollar ($931 million) transactions daily and some 40% of payments made in Australia going through its systems. The bank managed to book a profit of 7.3 billion Aussie dollars last year, an impressive result under conditions that saw its peers booking sharp declines.


CBA was also a champion of sustainability in 2020, contributing $20 million to disaster relief for communities affected by calamitous bushfires and droughts through the year.


Meanwhile in New Zealand, ANZ New Zealand’s CEO Antonia Watson acknowledged “unprecedented challenges” to the bank’s business, pointing to the economic environment and credit losses attached to the bank’s sale of UDC Finance, completed in September 2020. Still, ANZ New Zealand’s 27% decline in profits was decent enough, considering the domestic banking sector’s Covid-19-induced lackluster performance.


The bank proved itself a good citizen in response to the pandemic, offering financial assistance to around 43,000 personal, home and business loan customers through various payment-deferral and interest-only schemes, covering lending of around 27 billion New Zealand dollars ($19.4 billion).


Northern Asia


After some beleaguered recent years, Japan’s banking industry managed to weather the pandemic in impressive form, with system balance sheets powering ahead by 10% and some banks enjoying healthy ROE.


Mizuho, our Best Bank in Japan, achieved an eye-watering 443% surge in profitability last year, bouncing back after weathering hefty restructuring-cost charges in 2019, with revenue boosted by cloud-based digital innovation drives incorporating device-location and facial-recognition technology.


Among Japan’s reams of banks, Mizuho is managing to establish a solid set of sustainable and ESG-focused credentials. Last May, the bank was the first financial services group in Japan to publish a report by the Task Force on Climate-related Financial Disclosures. To enhance diversity within the workforce, last year Mizuho established a diversity and inclusion promotion committee; the company made the Bloomberg Gender-Equality Index for the fifth consecutive year.


“We are working to transform outdated mindsets and are continually striving to improve the work environment to ensure that each individual can fully utilize their capabilities,” said Tatsufumi Sakai, group CEO of Mizuho Financial Group, in a statement announcing the bank’s inclusion in the index.


Another ESG box was ticked in the form of a €500 million ($599 million) green bond issued last year to meet the requirements of Mizuho’s environmentally focused customers and issued in line with the International Capital Market Association’s Green Bond Principles.


South Korea’s banking industry is often regarded as a poor relation versus the country’s chaebols, in terms of ambition, dynamism and reach. But international expansion is underway, led by Hana Bank, driven by its project finance franchise and underpinned by the “green industrial revolution.”


Among the four big Korean commercial banks, Hana has the most extensive overseas reach, through 160 overseas networks in 24 countries—including 135 networks within APAC. Hana demonstrated an ongoing commitment to ESG: providing financing to renewable energy projects such as solar, wind, hydro and biomass; the construction of green buildings; lending according to socioeconomic advancement; and making loans to financially alienated communities, social enterprises and sectors such as affordable housing and employment generation.


The Subcontinent


India’s HDFC (Housing Development Finance Corporation), the country’s largest privately owned bank by assets, bucked the coronavirus trend last year, registering a remarkable 24% growth in fiscal year 2019 profits and containing bad loans at 1.4% of gross advances—something of an achievement against a backdrop of ever-souring loans within the country’s banking system.


The bank aligns itself with the UN’s Sustainable Development Goals as core to its business strategy and reinforced the carbon-reducing mission statement by converting its business premises in accordance with green-building norms.


HDFC is keeping up to speed in the fintech stakes, having last December invested in Smallcase Technologies, a fintech firm that enables investors to acquire a basket of stocks and ETFs in line with compliance requirements.


The bank has in recent years been investing in a range of technologies: from public to private cloud, the Internet of Things and across mobile, social and analytic segments. Millennials are a key focus of HDFC’s business strategy, with the bank’s Millennia Debit Cards focused on conversational banking and utilizing zero interest capability for e-commerce transactions.


National Development Bank is one of Sri Lanka’s largest financial services group, with operations extending from retail to investment banking, securities trading, wealth management and private equity. The bank has placed emphasis on developing Sri Lanka’s micro, small and midsize enterprise (MSME) sector and maintained high levels of regulatory capital and low levels of NPLs. Net profits were up 8% in 2020.


State-owned National Bank of Pakistan (NBP), one of the top commercial banks, last year closed an impressive range of capital markets transactions worth over $40 billion. The bank places corporate social responsibility at the core of its mission statement and has active programs within education, health, culture and natural-disaster relief. NBP’s domestic and international reach is impressive: Domestic branches number more than 1,500 across the country; and the bank conducts business in the US, Europe, Hong Kong, Japan, South Korea and across Central Asia.


Bangladesh’s City Bank has established itself as the “thought leader” within the country’s banking industry, demonstrating eagerness to innovate and a willingness to challenge the status quo. Trade finance is its core business line, and in 2020 the bank financed almost $4 billion of trade. City Bank is the country’s leading credit card issuer, with a 32% market share and the biggest point-of-sale network in the country.


Government-owned, in part, Nepal’s Rastriya Banijya Bank has used its wide geographical spread—the bank’s branches serve the remotest parts of this mountainous country—with a continuous cognizance of corporate social responsibility and financial inclusion for marginalized individuals and the smallest SMEs.


Southeast Asia


DBS, Global Finance’s Best Bank in Singapore, managed to increase operating profit by 2% in 2020, with the 8.4 billion Singapore dollar ($6.3 billion) total a record for income, demonstrating the resilience of its franchise against a plethora of headwinds, including low interest rates. The bank reaped the rewards of more than eight years in digital investment, enabling it to transition to new business modus operandi thanks to a stack of modern technology including use of the cloud, deep data infrastructure, artificial intelligence and machine learning.


The bank continues to hit high scores in sustainability, featured on the Dow Jones Sustainability Index. DBS also ranks in the top global quartile on the Bloomberg Gender-Equality Index, both for the fourth consecutive year.


UAB Bank in Myanmar has achieved a lot in the 11-odd years since its founding. The bank has achieved a somewhat staggering 242% compound annual growth rate of its profit before tax over the past five years, kept a lid on NPLs of just 5% (some banks in Myanmar are sitting on a 50% NPL rate) and enjoyed a highly competitive cost-to-income ratio of just over 50%. UAB was the first bank in the country to step up during the start of the pandemic to offer relief packages to borrowers.


Indonesia’s BCA (Bank Central Asia) is positioned well ahead of its domestic competition in terms of sheer scale, asset quality and arguably corporate ambition. The bank registered an eye-popping 171% growth in assets in 2020 and grew its loan book by 12%, more than 30% above Indonesia’s banking system average.


BCA made younger customers the focus of its long-term growth strategy and keys into this largely urban demographic via its sophisticated payments ecosystem under the KlikBCA internet banking platform, the Sakuku e-wallet and the Flazz stored-value card.


The Philippines’ BDO Unibank came through 2020 in decent shape, managing to weather the pandemic storm thanks to solid capital adequacy (14.3%) and a rising customer base, within both corporate and consumer markets. Total loan growth and ROE each came in at 6%. BDO was quick to act in response to the impact of the pandemic on its customer base, providing loan restructuring and moratoria under the Bayanihan I and II programs.


Bangkok Bank excels in Thailand’s corporate banking field, serving a broad array of large domestic and multinational companies across a wide array of industries and via services ranging from corporate finance, transaction and investment banking to trade finance. Notable achievements last year were the provision of project finance advisory services and credit facilities for key infrastructure projects as well as in public debt market underwriting and within structured and asset-backed finance. In the consumer banking sphere, the bank offers a full suite of services through its extensive nationwide branch network and via applications such as Bangkok Bank Mobile Banking.


Vietnam’s MSB grew total loans by 25% in 2020, boosted its customer base by 13% and saw fee income surge 42%, all admirable data points amid challenging regional economic conditions—although the country was spared the worst effects of the pandemic, with relatively few cases of Covid-19 and only one national lockdown. MSB has a strong footprint within the state-owned enterprise sector and managed in 2020 to boost corporate banking net revenue by almost 40%, with profits in that business line soaring over 60% last year.


Once again, Cambodia’s ABA Bank continued its multiyear run of superlative achievements, managing against the onslaught of the pandemic to deliver some remarkable data points: a 21% rise in net profit, combined with a 67% surge in customers and a 40% rise in total assets. This is remarkable in an overbanked country—Cambodia houses 53 commercial banks serving 16 million people—and is testament to ABA’s cutting-edge services facilitated by digital banking solutions and platforms.


Public Bank commands a dominant position within Malaysia’s banking industry, accounting for almost 18% of domestic loans, 33% of the unit trust market, 35% of commercial property financing and 30% of auto financing. The bank survived the brutal business backdrop in Malaysia last year, thanks to the insulation provided by its broad footprint across Asia-Pacific, which stretches from mainland China and Hong Kong, through to Cambodia, Laos, Vietnam and Sri Lanka.


Operating profit for 2020 rose 1.6%, with pressure exerted by pandemic-related provisions and a one-off net modification loss.


Brunei Darussalam’s BIBD is the country’s highest-rated bank (A- S&P Global) thanks in part to its high capitalization, which at 19% sits substantially higher than the 10% regulatory capital adequacy ratio limit.


The bank remains the benchmark for conducting Shariah finance in the country—it operates the largest stand-alone Islamic treasury desk within Southeast Asia—and holds almost 60% of banking system deposits. Net profits fell 12% in 2020, but ROE was a comfortable 11%, shrinking by just 1.5% year on year.


Central Asia and the Caucasus


Pasha Bank is Azerbaijan’s largest privately owned bank by total equity and had an auspicious 2020: Net profits increased by 13% and assets by 15%, with the bank commanding 14% and 17% of the country’s banking system loans and deposits respectively; and that market share is set to rise thanks to Pasha’s broad suite of client offerings.


ForteBank bucked the banking sector trend in Kazakhstan last year, registering a 25% increase in profits and boosting total clients by 20%. The bank was the only Kazakh lender to enjoy a ratings upgrade in 2020 and distinguished its reputation by offering grace periods on debt for those affected economically by the pandemic.


AIB, founded in 2004, is the only privately owned bank in Afghanistan to enjoy US dollar clearing facilities within the international banking community, thanks to its adherence to best practice. This capability was made more significant in 2019 thanks to Standard Chartered’s withdrawal from the country. Its reputation as the country’s preeminent commercial bank is underlined by its close relationships with multilateral development banks and agencies and it is the largest, most profitable bank in Afghanistan.


Mongolia’s XacBank benefited from the country’s ongoing banking sector reform and retained a relatively subdued NPL book—at just 5.6% versus the 11% system average—despite the country’s Covid-19-induced 5% contraction last year, according to the World Bank. The customer deposit/total funding ratio was a healthy 59% last year, although net profits declined 35%.


Kyrgyzstan’s DemirBank grew its main financial health indicators in 2020, with assets increasing by 11.8% for a 9% market share. ROE was a respectable 14.7% and profitswere  up by 7.3% at the end of 2020. The bank has in recent years focused on developing internet and mobile banking services, offering Swift transfers and foreign exchange transaction capability to retail customers.


“More than just a bank,” is the marketing slogan of Uzbekistan’s Ziraat Bank, and this domestic subsidiary of Turkey’s Ziraat Bankasi has impressed with expansion into the country’s underdeveloped banking industry. Moody’s affirmed the bank’s B3 long-term local and foreign deposit ratings last year, citing implied support from the parent, a strong capital buffer and solid recurring income.


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