Mumbai: Global corporate and investment banks will derive almost half their revenues from Asia by 2015, according to a report by global consultancy firm McKinsey & Co.
By 2015, the share of Asian markets in these banks’ overall revenues will be as much as 45%, or about $790 billion, compared to about 33%, or $442 billion in 2010, the report said.
“The surprisingly strong economic health of Asian economies in 2010 saw the risk-adjusted corporate and investment banking (CIB) revenues from the continent touching nearly $442 billion, just under a third of the global total,” the McKinsey report, titled, ‘Asia: The Future of Corporate and Investment Banking’, said.
“But by 2015, this revenue pool will rise to about $790 billion by 2015, or 45% of the global CIB revenue,”
“Asia will become the largest and fastest growing region in the wholesale banking universe by 2015,” McKinsey Partner and Asia Corporate Banking Practices Leader Akash Lal said.
Lal added that the dynamics of the game will soon change, as more players would enter and customers would become more knowledgeable and demanding. Cross-regional business would also become more important over the next few years.
For those foreign financial institutions looking to benefit from Asia’s fast-growing CIB market, regulation and more intense competition would be the biggest challenges, the firm’s Senior Partner and Asia Corporate and Investment Banking Practices Head, Emmanuel Pitsilis, said.
“Global banks will have to find a path to become more Asian by making the right investments from both business as well as geographical perspectives, apart from building a business model that is both profitable and durable,” he added.
Incidentally, this optimism comes at a time when core investment banking activities have witnessed a sharp fall due to the global market slowdown triggered by the euro zone debt crisis and the faltering global recovery.
Core investment banking revenue in the country is down by about 30% at just $467 million this year.
The report also said the lion’s share of Asia’s new CIB revenues would come from China and India. Accounting for 50% of Asia’s CIB revenues, China is already the region’s largest wholesale banking market, said the report.