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Slowdown of Asian investment in Aus sign of sustainability
A generally positive outlook for the foreign bank landscape in Australia has been revealed in a new report published by MinterEllison.
Melissa Coade
Foreign capital flow trends in Australia have been tracked by MinterEllison for the past three years and published in an annual report entitled the Foreign Bank Tracker.
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While report produced by the global law firm has shown the first drop in Asian bank growth in Australia since 2013, debt capital markets expert John Elias (pictured) has suggested the slowdown is in fact a sign that the rapidly growing investment flowing from Asia will be more sustainable.
“Asian banks have recorded strong year-on-year growth above 15 per cent since 2011. However, in the past year, the growth rate slowed to 8 per cent down from 22 per cent the year before,” Mr Elias said.
The MinterEllison partner said that the recent slowdown could be attributed, in part, to increased scrutiny of outbound investment activities in China. He also added that in the last nine years, growth from foreign banks into Australia has been driven by Asian banks.
“In our view, the slowdown in Asian investment is likely to be more sustainable than the expansion from previous years,” Mr Elias said.
He also pointed to other indications of Asian bank confidence, despite the pull-back on growth, including four new banks entering Australia this year from mainland China and Taiwan, as well as Japan.
The report showed a total of 50 foreign banks which are now operating in Australia, representing 34 per cent of Authorised Deposit-taking Institutions (ADIs) in the Australian market.
Mr Elias said that broadly speaking, the tracker revealed a “generally positive picture”, citing an increase in the total volume of resident assets in Australia by A$21.6 billion to reach A$389.6 billion.
Other promising signs included recovering confidence among European banks post Global Financial Crisis, with an increase over $10 billion in resident assets from 6 per cent year-on-year growth.
“Europe experienced its first two consecutive years of positive growth since 2005,” Mr Elias said.
“This represents an increase of $10.6 billion in resident assets, bringing European bank totals to $183.6 billion.”
Notably strong performances for foreign banks in Australia were also recorded for the Bank of Nova Scotia and the Imperial Bank of Canada. Both banks recorded a year-on-year growth of 63 per cent.
“We consider this, together with the other upticks in foreign bank growth in Australia last year, to be a positive sign of intent to build a long-term investment strategy," said Mr Elias.
According to the tracker, performance of US bank growth in Australia contrasted with the performance of its Canadian neighbours, moving from 0 per cent growth to -3 per cent.
