Asian lenders take Australia market share

SYDNEY: Asian banks are ramping up their loans business in Australia, taking market share from local lenders who are trying to manage the rising regulatory costs of maintaining adequate capital to protect against potential credit defaults, according to a Basis Point report.

The Australian banks, however, are sanguine about the rising foreign competition, seeing it as a route to participating in syndicated loans that keep its broad client base intact while meeting regulators' stringent rules.

“More bank liquidity is good for the borrower.

“There is a greater drive for more efficient capital usage and capital to support clients,” said Michael Isaacs, executive director of loan syndications at Australia and New Zealand Banking Group .

A case in point is last year's sale of New South Wales energy company Aus Grid by Australian Super and IFM Investors.

The deal was backed by a A$ 12.77bil (US $9.69bil) acquisition loan from 21 lenders, 10 of whom were Asian institutions providing A $5.71bil of that loan, sources previously told Basis Point.

Data from Thomson Reuters Loan Pricing Corp show Chinese lenders more than doubled their share of syndicated and club loans marketed in Australia in 2016 to 10.05% from 3.9% in 2015.

Taiwanese banks also increased their share of all lending to 2.54% from 0.6% in 2015, while it was up three percentage points to 14.83% for Japanese lenders.

In the same period, the Australian banks had their share of lending shaved by almost 10 percentage points to 42.9% in 2016, Basis Point said in a report published yesterday.

Chinese companies are targeting investments in the mining sector in Australia after a recovery in commodity prices according to a senior loans banker in Beijing with a major Chinese lender, who spoke on the condition of anonymity as he was not authorised to speak to the media.

Indeed, Australian banks can expect to see more competition from overseas.

Taiwan’s Taishin International Bank has received approval from Australia’s Australian Prudential Regulation Authority (APRA) to open a full branch this year, sources familiar with the process told Basis Point.

China CITIC Bank and China Merchants Bank as well as Bank of Taiwan, the island’s largest bank, are also applying for branch licences, said the sources, who declined to be identified because the matter was not public.

But this rapid expansion has not gone unnoticed by the Australia regulators, with the Reserve Bank governor Glenn Stevens warning of potential systemic risks.

There are signs that Chinese banks-led lending growth could slow.

Since late last year, the Chinese government has delayed approving a number of overseas acquisitions by making it harder for Chinese firms to obtain cross-border guarantees and to transmit money from onshore to offshore entities. — Reuters