Five Years After Lehmann: Changes in the Banking World

Five Years After Lehmann: Changes in the Banking World



Erik Versavel, CEO, ING Bank, Ukraine

Erik Versavel, CEO, ING Bank, Ukraine



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Five Years After Lehmann: Changes in the Banking World Five Years After Lehmann: Changes in the Banking World Presentation Transcript

  • Five years after Lehman Changes in thebanking world – Europe vs AsiaErik VersavelCountry HeadING Commercial Banking Ukraine
  • GDP indicators for selected countriesReal GDPgrowth2009 2010 2011 2012US -3.1% 2.4% 1.8% 2.2%Euro area -4.4% 2.0% 1.4% -0.6%China 9.2% 10.4% 9.2% 7.8%Japan -5.5% 4.5% -0.8% 2.0%India 5.9% 10.1% 6.8% 4.0%Korea 0.3% 6.3% 3.6% 2.0%Ukraine -14.8% 4.1% 5.2% 0.2%
  • Financial system before 2008•  Highly developed.•  High liquidity.•  High leverage (total assets over equity).•  Wide and complex product range.•  Generally high Returns on Equity.3
  • Financial system after 2008•  Reducing leverage and complexity.•  Regulatory expansion.•  Global regulatory reform – national agenda’s.•  Banks de-globalise.•  Lower growth prospects in mature markets.•  Banks cannot move “homemarkets”, and cannot invest in fast growingmarkets.•  Large companies doubled their cash holdings.•  Disintermediation reducing business opportunities for banks.•  New players and technologies entering market: telecom, retail…4
  • Corporate cash levels5
  • Return on Equity•  In current economic – financial system, ROE remains most criticalparameter.•  Banks need to increase their equity.•  But as they de-leverage and de-globalise, profitability reduces, andROE hurdles cannot be met.•  Therefore they cannot easily raise capital.•  Therefore large cost cutting exercises across mature markets.6
  • Merchandise exports and imports in currentUSD by region, 2012*7* Values and Shares include intra-EU tradeSource: World Trade Organisation
  • Meanwhile in Asia•  Foreign Exchange Reserves:•  FER increased from USD 2 trio in 2000 to USD 12 trio in 2012, withexpansion coming mostly from Asia.•  Asia constitutes 52% of the world.•  China alone represents 25%.•  Top 10 countries include 7 Asian countries.•  Standard & Poors:•  upgraded 4 Asian countries in last 6 months: Korea, Pakistan, Philippines,Vietnam.•  India is only country downgraded in last 6 months.•  Asia now has 3 countries with AAA rating (Australia, Hong Kong,Singapore).•  Top 10 of AAA countries is still mostly European countries (only Singaporeis in top 10).8
  • Forex and Gold reserves925  104  140  148  182  259  287  317  327  409  864  1  351    -­‐  500  1  000  1  500  2  000  2  500  3  000UkraineIndonesiaMalaysiaUSThailandSingaporeIndiaHong  KongKoreaTaiwanEurosystemJapanChinaFigures Dec 31 2012E, bln USDSource: CIA data3  312  
  • Internationalisation of Asian companiesForbes Global 2000Number of Asian companies in top 2000:2004: 2502008: 3592012: 733 of which Japan 258 and China 13610
  • Banks in Asia•  Largely unaffected by banking crisis, eurozone problems.•  High correlation with growth in China (except India).•  Rising leverage contributing to build-up of risk in the system.•  Regional banks emerging / getting stronger.11
  • Something about China•  IPO’s: China sets world records in 2010 and 2011 (USD 45 bio in2011).•  Internationalization of Renminbi (cross border settlements, cashpayments offshore…).•  Reform of the RMB exchange rate.•  Continues to inject high liquidity into the system.•  In 2000 there were only 2 Porsches in China, now 50,000 with 25,000expected to be sold in 2012.12
  • PBOC Financial Statistics13Money Supply• Broad money (M2) stood at 75.73 trillion yuan: up 15.3% yoy• Narrow money (M1) registered 26.68 trillion yuan: up 12.9% yoy• Currency in circulation (M0) posted 4.55 trillion yuan: up 14.7% yoyLoans• RMB and FCY loans totalled 53.37 trillion yuan: up 17.2% yoy• RMB loans registered 50.21 trillion yuan: up 17.5% yoy• FCY loans registered $485.1 billion: up 17.6% yoyDeposits• RMB and FCY deposits totalled 77.17 trillion yuan: up 17.1% yoy• RMB deposits registered 75.62 trillion yuan: up 17.3% yoy• FCY deposits stood at $237.9 billion: up 14.3% yoy
  • Internationalization of RenminbiDimsum bond Settlement ofinternational trade in RMB14
  • 15Questions?