Asian banks step in to fill European lending gap

As the deleveraging process among European banks gathers steam, banks in Asia are set to offer up their balance sheets to fill the gap, believes Barclays Capital.

  • 21 Nov 2011
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In response to a challenging domestic situation, European banks have begun a deleveraging process that’s set to see them withdraw more balance sheet from Asia. But regional banks will step up their lending and even as their European counterparts retreat, according to a November 17 Barclays Capital research report headlined by Prakriti Sofat, a regional economist at the UK lender.

“We believe that an orderly and gradual deleveraging by European banks will not create significant stress in lending/real activity across Asia, as stronger local and regional banks (mainly from Singapore, Australia and Japan) are able to step in,” said the report. “We believe these banks have strong appetite for lending and to the extent there is overlap of business (eg, trade finance) we would expect these banks to gain market share.”

Sofat notes that since Lehman Brothers collapsed European banks have (excluding the UK) have cut back activity in Asia by around 30% whereas British and American lenders have expanded aggressively during this period.

Asia’s exposure to French banks declined by US$3 billion in quarter two relative to quarter one – mainly in Hong Kong and Singapore – and German banks have scaled back in Taiwan, Malaysia and Singapore, according to BarCap.

The report notes that Australian and Japanese lenders have already expanded at a rapid clip and are set to gain further market share - along with their Singaporean counterparts – as European banks scale back further.

“Comments from large banks in [the] Asia-Pacific during recent earnings releases also point to their ability to step into the lending space in the region that may be vacated by European banks,” said Sofat. “However, there could be some dislocation during the transition period.”

  • 21 Nov 2011

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Rank Lead Manager Amount $m No of issues Share %
  • Last updated
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1 Citi 8,013.43 23 16.84%
2 HSBC 4,701.26 20 9.88%
3 JPMorgan 3,857.21 16 8.10%
4 Deutsche Bank 3,334.38 12 7.01%
5 Bank of America Merrill Lynch 2,101.20 11 4.41%

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Rank Lead Manager Amount $m No of issues Share %
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1 Citi 2,421.53 5 33.29%
2 HSBC 937.89 2 12.90%
3 Itau BBA 916.67 2 12.60%
4 Bradesco BBI 900.00 2 12.37%
5 Morgan Stanley 800.00 1 11.00%

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1 HSBC 295.00 1 32.24%
1 Credit Agricole CIB 295.00 1 32.24%
4 Mitsubishi UFJ Financial Group 30.00 1 3.28%
Subtotal 915.00 2 100.00%

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Rank Lead Manager Amount $m No of issues Share %
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5 Citi 95.36 35 5.16%

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Rank Lead Manager Amount $m No of issues Share %
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1 UniCredit 4,163.05 29 12.35%
2 ING 3,184.83 25 9.45%
3 SG Corporate & Investment Banking 2,911.64 17 8.64%
4 Citi 2,741.75 18 8.13%
5 HSBC 1,822.32 18 5.41%

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Rank Lead Manager Amount $m No of issues Share %
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1 State Bank of India 262.46 3 12.40%
1 Citi 262.46 3 12.40%
3 Standard Chartered Bank 242.57 3 11.46%
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4 DBS 191.19 2 9.03%