Opportunities in banks industry amidst crisis

News about rural banks closing sends shivers to Philippine depositors, and also cast doubts on the stability of our banking institution. Can we blame them? It’s hard earned money so we expect people to guard them with their lives. Investigations are ongoing but people are not so interested with the outcome, they want their money and investments protected.

So given the situation and the economic slowdown, what can banks do to further strengthen their market position? Where are the opportunities?

Leading independent research and advisory firm Financial Insights, an IDC company, today announces the release of a report that assesses opportunities for banks in the current crisis environment. It highlights pockets of growth in lending in several Asia/Pacific markets, shifts in customer deposits which allow aggressive banks to gain market share, and opportunities for generating fee income. More insights are revealed in this new study, “Asia/Pacific Banking in 2009: Opportunities Amid A Crisis”.

“A thorough review of the market reveals some opportunities for revenue growth, and for further expansion of customer base and product portfolios despite the economic crisis,” remarks Michael Araneta, Senior Research Manager, Financial Insights Asia/Pacific. ”The environment however is by no means bright and rosy, and significant risks need to be considered. Market conditions are volatile, causing opportunities to shift quickly. The game will be won by those agile and capable enough to execute strategies efficiently,” Araneta continues.

Financial Insights notes that banks’ strategic IT initiatives have been realigned to reflect the opportunities in the market. Despite tight budgets, banks will still spend on technologies that allow them to blunt the adverse effects of the crisis, build business despite the slowdown, and operate efficiently in a crisis environment. For example, while banks need to continue investing in origination solutions for loan expansion, they also need to invest strategically in modeling and analytics. Investments in scoring, modeling, and analytics will help in key areas such as decisioning, pricing, servicing, fraud prevention, and even collections and recovery.

Highlights of this report include:
– Even before the escalation of the financial crisis, Asia/Pacific banks were already projecting a slowdown in lending for 2009. Financial Insights have revised downwards the estimated average loan growth for 12 key Asia/Pacific markets to 8.7%. However, there are still significant drivers for lending growth that need to be considered. These include government mandates and interventions, dwindling international funding options, microfinance, and moves by aggressive players to win market share from weakened rivals.

– Deposit mobilization will proceed impressively in under-banked countries like India (where industry deposit growth is expected to be at about 20% year-on-year in 2009) and Vietnam (estimated to be 11%). In most other Asia/Pacific markets however, it will be about acquiring market share from competing banks, or attracting customers away from savings and investment alternatives.

– While some fee income sources like corporate finance, underwriting, credit cards and wealth management sales will be affected by the market slowdown, opportunities to generate service-based fees, such as those charged on transaction accounts, fund transfers and cash management, will remain robust. New strategies will need to consider the ideal mix of fee income sources that the bank is able to support.

Araneta continues, “New business objectives and requirements are being used to justify traditional technology projects like core banking upgrades. The chase for deposits will hopefully help rebuild the momentum for core banking system projects in the medium term. Business and IT teams will consider the scalability of their current core systems as the bank’s deposit base expands, and as new deposit products need to be brought to market.”

“Overall, the financial crisis is expected to bring risk management back into focus. Technology teams should be ready to address risk management issues related to their work, including risks inherent in technologies under implementation, project implementation issues, as well as risks associated with vendors and technology partners,” Araneta adds.

The secret to success in this time of crisis is to stay focus and do not panic. It’s a man made problem so there will always be a solution. The key is to stay on course with your corporate objectives and goals and better address customer needs.

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