Banking on Asean
Southeast Asia’s growing affluence and ever-closer economic integration offer hot job opportunities for bankers
With rising affluence and steady economic growth, emerging Asia represents opportunity for both global and regional banking players eager to tap into an under-served area. The trick, however, is to understand the differences between the widely disparate emerging markets.
Vietnam, for example, is still in the early stages of monetisation, with demand only beginning to emerge. Small deposit and savings accounts, as well as small loans, dominate. They are typically serviced by community-based savings and credit groups in poor regions, and by micro-finance institutions in other rural and urban areas.
Once countries pass the US$2,000 mark in per capita GDP, they enter a new phase where bank accounts become more common, and consumers ponder the use of credit and debit cards, as well as car and payroll loans. Mortgages and other formal types of loans emerge, and lending to small and medium-sized businesses picks up. The biggest companies start tapping equity and fixed-income markets. Among emerging Asia, the Philippines, Thailand and Indonesia fit this bill.
Finally, at the other end of the ladder are nations like Malaysia, where per capita GDP has surpassed US$8,000. Formal bank loans are the norm for both retail and corporate clients; repayment terms on credit products lengthen; capital-market use matures; and firms turn to more long-term, complex financing vehicles and risk management products.
While far from homogenous, the underlying theme in emerging Asia is that rapidly expanding economies will provide ample room for growth, says Keith Pogson, managing partner for financial services in Asia-Pacific at EY.
He notes that while Vietnam and Indonesia face shorter-term risks – for example, non-performing loans and uncertainty over elections, respectively – they present significant growth opportunities in the longer term. Both are highly fragmented without dominant players, providing an open competitive landscape in which new entrants can quickly enter the market to achieve fast growth.
“In Indonesia, only around 25 to 30 million out of the 250 million population use banks. Estimates also reckon that only about 15 per cent of Vietnam’s money supply is in the banking system. When you have the potential of six times the present amount of money entering the system, that’s a huge change in perspective and an interesting place to be once the country’s banking sector climbs out of the primordial swamp,” Pogson says.
In the shorter run, he says, the financial services industries in the Philippines and Malaysia are expected to benefit from moderately fast growth in their economies. But both have relatively more mature markets dominated by entrenched players, making it hard for new entrants to achieve fast growth and benefit from the economies of scale needed to sustain profit growth.
In the Philippines, industry consolidation is expected to remain a dominant theme. Thailand continues to recover from political turmoil as well as last year’s floods, providing moderate but stable growth in financial services for the foreseeable future.
Pogson notes that one major development which could provide a boost for banks is the establishment of the Asean Economic Community, officially slated for 2015. Economic integration among the Southeast Asian nations is expected to bring about significantly improved mobility of labour. As workers migrate across borders to seek more favourable job offers, opportunities exist for banks to persuade them to review their existing banking relationships and capture new business.
There is a future possibility of so-called “passporting” for the financial services sector, where an institution already licensed to operate in one economic union member can set up operations in others. Pogson says this could lead to the rise of “super-national” Southeast Asian banks.
“We’ll see more polarisation towards regional players,” Pogson says.
He expects national champions to develop in Vietnam and Indonesia. Philippine banks are expected to become more outgoing in building regional networks.
On the jobs front, Mark Ellwood, Southeast Asia managing director for recruitment firm Robert Walters, says that across the region, demand for banking talent outstrips supply, due largely to the small size of native talent pools. In addition to local lenders, international banks are looking to expand operations to supplement revenue in slowing developed markets.
Ellwood says key areas of demand for both domestic and international players are risk and compliance, audit, and finance. Banks are also seeking relationship managers to service a growing “mass-affluent” class as they build up wealth-management portfolios. Another buoyant area is senior banking management hires, as international banks open branches across the region. These are typically filled by professionals with many years of experience in a global environment, or bankers aiming to return to their home nations.
Marc Baloch, director of financial services practice at Harvey Nash Asia Pacific, says hiring among senior executives is strong in the Philippines. Elsewhere, he notes that job markets in Thailand and Indonesia are heavily hindered by regulation, making expatriate hires difficult. This is especially problematic for Indonesia, where the banking sector is less developed and experienced native talent is lacking. Banks thus make do with support from Singaporean regional hubs. This is made worse because expatriates favour relocation to Thailand due to cultural sensitivities, Baloch notes.
He adds that foreign banks such as Standard Chartered, ANZ, HSBC and Citi face difficulties in hiring native talent in Thailand and Indonesia, as candidates tend to see them as disconnected from the market compared with local banks.
Finally, he says that candidates who are over 30 years old with managerial experience are best placed to benefit from the demand in banking jobs. He says internationally proven talent who are able to communicate effectively at the highest levels are the hardest to find.
“To compensate for the scarcity of talent, a Japanese insurer, for example, recently paid a premium of up to 80 per cent on salaries to entice people to work with them in Indonesia. Salaries in both Indonesia and Thailand are spiralling ever upwards in the war for talent,” Baloch adds.