Asian Corporations Demanding More of Banking Partners

Asia’s top institutions are in growth mode, and want their banks to help fund them in that process, according to research from East & Partners. They also want more from transaction banking than a commoditised service.

The banking market research and analysis firm reports that research conducted in May this year found that 18.8% of Asia’s top 1,000 institutions indicated that change in their primary transaction banking relationship was either “definite” or “high probable”, suggesting that nearly 200 could change their bank within the next six months.

The May 2013 figure is slightly up from a similar survey in November 2012, when 17.7% of the top 1,000 said a change was ‘definite’ or ‘highly probable’. East said it has been examining the ‘churn’ rate since May 2004, when Asian institutions were more satisfied with their transaction banks and only 12.7% seriously considered changing.

The firm comments that “2004, of course, was in the less volatile period before the Global Financial Crisis (GFC), when banking was very different in so many ways, not least of which was access to credit.

“As the GFC hit, churn intention numbers started to pick up and hit a high of 31.7% in May 2007. This equates to 300 institutions changing their primary transaction bank in a six month period. The situation, however, was quickly defused. Asia was relatively calm during the GFC, having had its own crisis in 1998, and was a beacon of stability during that time.”

By November 2009, only 6.1% reported they were changing bank, a situation “which may have owed more to fear and a lack of alternatives than any satisfaction rating.” However, the churn rate has steadily risen since that low point and East suggests it could soon be approaching 20%

“Unlike the GFC, when institutions were rapidly deleveraging, access to debt is currently the major reason Asia’s top institutions are thinking of changing banks, and is identified as a factor by 82.3% of those inclined to change,” the firm reports. “When asked for the single most important initiative their bank could take to improve their quality of service, relaxation of debt covenants was the overwhelming response.”

Next in importance are lack of added value in a relationship, cited by 69.1%, and that value for money (67.4%).

By contrast in 2004, change was driven by service levels and performance, and only 24.9% of those planning to change banks were doing so for improved debt offerings and securities, with 9.7% citing value for money.

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