National Australia Bank (NAB)'s announcement of four senior hires in new roles within business and institutional banking in Asia last week is a clear statement of the bank's intent to capitalise on acquisition and trade flows between Australasia and the rest of the world. But the bank will struggle to stand out in what is proving a highly competitive space.
The appointments (see story) play into NAB’s broader plans to catch-up in an area widely regarded as rich in promise.
“These guys are our first hires in this area,” Steven Cranwell, regional general manager for business and institutional banking, Asia, at NAB told asiamoney.com.
“The intention initially is to make sure they are linked back into our franchise business in Australia. Beyond that, it will be about developing the business as and when, identifying the types of client we are going to be dealing with.”
NAB faces intense competition for Asia-Pacific trade and acquisitions flows, both domestically and regionally.
Rival Australian bank ANZ has already set itself the ambitious goal of ensuring that Asia-Pacific contributes 20% of its net profit by 2012. In first-half results to March 31, ANZ reported that Asia-Pacific, Europe and the Americas contributed 13% to group net profit.
One senior industry source said of NAB: “Its strategy focus kind of waxes and wanes. Fixing up its UK business seems to be its major priority, and then rolling out its [August 2009] Great Western Bank acquisition.
“Now it has set its sights on harvesting trade finance flows in Asia. In the new world going forward, Asia is clearly the bit that is growing and all the Australian banks have all been slightly late to the party.
“But NAB is definitely playing catch-up. The question centres on whether it [targeting Asia trade and acquisitions] is going to materially impact group earnings in the next few years, and this seems unlikely.
“NAB is making a strategic bet that the world gets better quickly, and it is going to focus on volume growth. But it has got to fill in the business around [the new hires], and these things don’t happen overnight.”
Cranwell conceded: “We were obviously deficient in the trade space. What we are endeavouring to do is to build capability both in terms of product and coverage in order for us to be able to capitalise on investment and trade flows between Australia and the rest of the world.”
These flows are flourishing, particularly given Australia’s abundance of natural resources. According to estimated government data, coal accounted for 40% of Australia’s exports in 2009, followed by iron ore & concentrates (30%) and gold (15%).
Asia-Pacific countries also made up the top four destinations for Australian exports last year. They were led by resource-hungry China (21.6%), followed by Japan (19.5%), Republic of Korea (7.9%) and India (7.4%) The US sits in fifth place with 4.9%.
The level of foreign investment into Australia, meanwhile, was A$1.93 trillion (US$1.66 trillion) for 2009, compared with A$1.16 trillion in Australian investment abroad.
NAB is focusing on core sectors in its offering: energy, utilities and natural resources, as well as food and beverages as Asian nations turn their attention to securing land and assets to feed an increasingly large and affluent middle-class population.
“The aim of our activity will be trade flows and natural resources sold to this region [Asia], as well as FDI [foreign direct investment] flowing back,” added Cranwell.
“This was a logical next step for us to build our coverage and capabilities in this part of the world. It is about turning our attention to places where perhaps we have not got business on the ground.
“From an FDI point of view, it is about making sure we have an offer on the ground for acquisitions that an Australian company might want to do in this part of the world, as well as for Asian clients looking for an acquisition in Australia.
“We are arguably the largest business bank in Australia, so there is a natural franchise that exists in that respect.”
NAB has a regional hub in Singapore, and a presence in Hong Kong and Japan. The bank has also applied to the China Banking Regulatory Commission for licences to set up a branch in mainland China.
“Obviously it [Asia trade and investment] is likely to continue to grow significantly as China continues to develop its infrastructure and as Japan continues to attempt to secure resources for its industry,” said Cranwell. “It will continue to flow and Australia is obviously very import in that regard.”
NAB’s new hires are supported by a centralised regional relationship team based in Hong Kong. As well as hiring Susumu Kondo as director of energy, utilities and natural resources based in Tokyo, Cranwell confirms that NAB is looking to make another appointment in the food and beverages sector in the short term.
But he added: “It [hiring] will be done in a measured way. We will be hiring people as and when we feel we need them. We don’t really have any targets in terms of absolute numbers.”