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Emerging Markets seem more attractive in size and profitability | Advantage Change

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Global Banking has looked to the Emerging Markets more than before even as the earlier cream of the crop like ING, Bank of America and other biggies that fell on the side in the melee of 2008, scrum forward by selling off all their global banking businesses.

For auditing or other general ex-poste reason big consultants have no contributed to the Global Banking and Capital Markets and confusion with more seats on national board looking for packaged bailouts and direct and indirect circumspection of their role by Governments finalizing reform and holding jobs in Washington for selling off bank holdings like Lehman treasuries and deciding the mechanics of the bankruptcies and who receives what from the proceeds.

Though the PWC report thus comes a little late in  the day, it is indeed a field day for the press writing in between the Wealth reports from Forbes and ML to grab a pie of the global banking corporations for their readers ( including serious commentator s like me and a lots of bank staff who do not get much from HO and branch communications. HSBC has already turned the EMS into a big strategy and heir analysis is available publicly too. The summary of the PWC Report:

1. Emerging Markets E7 become the largest market by profits in 2050 berating the G7 ( yet finished their dalliance with reform and domestic economy support from the banks in exchange for government stakes)

2. India first beats Japan as the no 3 market in 2033 and then China in 2050

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3. Brazil, Mexico, Indonesia and Turkey along with India enjoy the benefits of a younger labor force and seemingly open labor policies that allow global expats to come in and work in leadership positions at banks..Trust PWC to screw it up before they start on the race. They seem to have made it a habit with all Market sizing reports, comes 5 years after the big bang and hopelessly outdated and biased . I would recommend Stuart’s presentation for Market sizes and growths for those hoping to start off their initiatives with facts in hand

4. China will maintain its lead for the next 5-10 years but everyone else is right and their aging pop will ensure the edifice crumbles and it gives way to those in 2 and 3 above. I don’t think China is going to get soft too easily, unless the homeless and the poor have been reduced to an uncounted majority like in the G7

However the report is likely to feed all retail banking frenzies. Here in India it is a mixed bag with Barclays and Socgen turning back in a failed decade of work and new ones like ABN ( Diamond traderS accounts given to Fortis and HSBC locally will probably flow back to them) and Grindlays (ANZ) which was always pretty good in Asia in Forex.

Mortgages refuse to take off in these economies yet again and expats are unlikely to get a look in till that market becomes healthy and the thrust by 2015 or later. High interest rates, a tough political Calendar and dystrophy in all Global Banking practices and the G7 threads would ensure that an earlier recovery is shot in the knees before it gets up ready to run the marathon.

India does allow foreign banks and global investments easy entry in the banking and mortgages in the midst of further branch license easing but would require tough Capital norms with independent bank holding companies on the anvil and also a mooted paper for supporting the Central Financial Stability and Development Council of the MoF with a department regulating financial holding companies across the banking, insurance, mutual funds, NBFC and other subsidiaries in an overall structure not in control of the bank but controlling the bank along with others.

The Financial holding company act for example has been holding back the state from participating in the SBI rights offer of $4 bln  which gives it addl capital in insurance and other Card NBFCs while it wants to hold 55% as per Banking law in the SBI banking corp only.  Similarly exit concerns at global banks continue into 2012, with Barclays and Bank of America leading others filling the Capital Gaps with distress sales of broking, corporate and international banking businesses, often JVs with a lot of potential especially suited to attack the delicious India and China pie

Also Consumption market and thus High interest banking regimes may suffer setbacks in Asia and Europe as inflation remains high, unemployment refuses to go away and US and developed world markets are not the only ones to lose in the new melee.

Emerging Market ETF launches by HSBC and local Yuan Funds in China with Goldman Sachs are thus everyone will follow with great interest and inquiry HSBC is otherwise ranked 17th in ETFs with $8.2 bln AUM. HSBC would also be closing branches in London and India and China are not their planned biggest 5 EM markets , least not India where there 100 odd branches are doing a book of INR 1 Tln

 

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