Corporate, investment banking to be boosted

SHANGHAI - China is set to play a major role in the growth of the investment banking market in Asia. The nation will become the continent's largest wholesale banking market by 2015, when Asia itself is expected to be the world's largest market for corporate and investment banking (CIB).

That's the conclusion of a report released by McKinsey & Co on Thursday.

By 2010, risk-adjusted CIB revenues in Asia had already reached nearly $442 billion, equal to just below one-third of the global total. That figure will achieve a revenue pool of about $790 billion, increasing the percentage to 45 percent, by 2015.

At present, China accounts for 50 percent of Asia's CIB revenues, and is expected to account for 60 percent in five years' time.

"Asia, especially China, will become the largest and fastest-growing region in the wholesale banking universe by 2015 and the dynamics of the game will change with more players entering, customers becoming more knowledgeable and demanding, and cross-regional business becoming more important," said Xu Jun, an associate partner at McKinsey's Shanghai office.

The report showed that while large companies with comparatively advanced product needs will continue to be the largest CIB customer segment with $326 billion in post-risk revenues, medium-sized companies will achieve rapid growth as smaller-scale private enterprises expand.

"We hope that we will have the opportunity to buy financial products and participate in the investment banking services offered by foreign banks, because at present my company mostly deals with local banks," said Wu Shengneng, senior management officer at Kangnai Group Co Ltd, a medium-sized enterprise in Zhejiang province that's a leading shoemaker. The Mc-Kinsey report also predicts that Asia's capital market and investment banking sector have the potential to offer opportunities worth $158 billion by 2015, nearly twice as much as at present.

"The regional focus of foreign banks will naturally shift from developed Asia to China and India by providing more customer-oriented products, not only focusing on the expansion of the customer groups," said Emmanuel Pitsilis, senior partner and head of the Asia Corporate and Investment Banking Division at McKinsey.

However, the problem for foreign banks at present is that there are still certain regional restrictions governing the introduction of financial products and their ability to expand the customer market as they want.

"For foreign financial institutions who would like to benefit from Asia's fast-growing CIB market, regulation and more intense competition will be the biggest challenges," said Pitsilis.

"Although we're quite interested in utilizing the opportunities provided by foreign banks, we are unsure whether the government will offer potential assistance and guidelines to help us step into the global investment market," said Wu.

According to the report, the majority of global banks need to focus on a strategy of becoming more localized, improving risk-control management for enterprises and increasing cooperation with local banks.