Growth in Asian operations shrinks in face of competition

Two of the biggest foreign banks in Asia have underlined the challenging environment facing lenders in the region, as profits are constrained by slower growth and stiff competition.

In a sign of the challenges facing ANZ, which is targeting Asia as a key source of growth, British-listed Standard Chartered reported slowing income growth in several key Asian markets, as its 2012 profits edged up less than 1 per cent to $US4.79 billion, compared with 12 per cent growth a year earlier.

Standard Chartered, which is heavily focused on emerging economies, said growth in Hong Kong had slowed to 6 per cent, from 19 per cent in 2011, and income in Singapore rose 5 per cent, from 27 per cent a year earlier. While it had experienced a surge in income from China, it described the previous year as "challenging" and said this would continue into this year.

HSBC, one of the biggest banks in the world with a major presence in Asia, also this week reported that its net interest margin had narrowed in the year to December to 2.32 per cent, from 2.51 per cent.

Group finance director Iain Mackay said HSBC's margins in Asia outside of Hong Kong had been squeezed by the slump in global interest rates, but argued they were holding up "remarkably well".

He made the comments after HSBC handed down a 6 per cent slump in pre-tax profits to $US20.6 billion, after it was hit with fines in relation to money laundering charges in the US and Mexico.

The results come after ANZ last month said its margins had been squeezed by increased competition in Asian markets, which are also a growing focus for Commonwealth Bank, NAB and Westpac.

Although both HSBC and Standard Chartered were upbeat about China's prospects, their results highlighted the challenge created by economic uncertainty and growing competition.

HSBC's chief executive, Stuart Gulliver, said the bank was expecting economic growth of 8.6 per cent in China this year.

"Whilst the operating environment for financial institutions remains difficult, our core business will continue to reap the benefit of recovering economic growth in mainland China," Mr Gulliver said.