Two of the biggest foreign banks in Asia have underlined the tests 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 Asian banking as a key source of growth, UK-listed Standard Chartered reported slowing income growth in several key Asian markets, as its 2012 profits edged up by less than 1 per cent to $US4.79 billion, compared with 12 per cent growth a year earlier. Standard Chartered, heavily focused on emerging economies, said its income growth in Hong Kong had slowed to 6 per cent, from 19 per cent in 2011, and income in Singapore rose 5 per cent, compared with 27 per cent a year earlier.
While it had experienced a surge in income from China, the bank described the previous year as "challenging" and predicted this would continue into 2013.
London-based 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 a year earlier.
Group finance director Iain Mackay said its margins in Asia outside Hong Kong had been squeezed by the slump in global interest rates, but were holding up "remarkably well". He made the comments after HSBC handed down a 6 per cent slump in pre-tax profit to $US20.6 billion, after it was hit with hefty fines in relation to money-laundering charges in the US and Mexico.
The results come after ANZ Bank last month said its margins had been squeezed by more competition in Asian markets, which are also a focus for Commonwealth Bank, NAB and Westpac.
Although HSBC and Standard Chartered were optimistic about China's growth prospects, their results highlighted the challenge created by economic uncertainty and more competition in the region. HSBC chief executive Stuart Gulliver said the bank was expecting economic growth of 8.6 per cent in China this year, compared with growth rates in developed economies of just 1 per cent.
"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 and its positive impact on other faster-growing regions," he said.