Retail banking income of Asia to grow 10% over 4 years

MANILA, Philippines - The Asian Banker said Philippine banks would still have the second fastest growing earnings from retail banking amid the complex and constantly evolving operating environment.

The result of the large-scale study of the Asian Banker Research showed Asia Pacific’s retail banking industry would continue to grow, albeit at a slightly slower pace of 10 percent between 2016 and 2020 from 12 percent between 2012 and 2014.

The publication expects the upward trend in the retail banking income from developing markets to continue and reach 73 percent of gross retail banking in the region given the better growth prospects. It accounted for around 67 percent of the gross retail banking income of the region in 2016, increasing gradually from 60 percent in 2012.

The growth of the retail banking income in the Philippines is seen slowing down to about 12 to 13 percent over the next few years from about 17 percent but would still be the second fastest after Vietnam.

“Most markets in the region will see flat or slightly declining retail banking income growth over the next four years, with the exception of Korea and Vietnam. Vietnam is expected to generate the fastest retail banking income growth at a compounded annual growth rate of 25 percent between 2016 and 2020, as Vietnamese banks are shifting from corporate banking to retail banking.

Retail banking income in mature markets is expected to grow at a stable CAGR of five percent over the next four years, while retail banking income in developing markets will expand at a CAGR of 12.1 percent, slower than 14.4 percent between 2012 and 2016 It is therefore imperative for banks to explore new sources of income and implement adequate control cost.

Indonesia’s retail financial services industry remains the most profitable in the region. Bank Mandiri in Indonesia continued its strong retail banking financial performance in 2015, with the highest retail profitability measured by the return on retail banking assets.

In addition, Bank Negara Indonesia, Citibank in India and Union Bank of the Philippines also produced high return on retail banking assets at above five percent.

Overall, Asia Pacific banks have increasingly relied on the contribution of their retail banking business.

East West Banking Corp. in the Philippines, ING Australia and TISCO Bank in Thailand were the top banks in retail banking income contribution with more than 80 percent to total bank income.