In terms of aggregate assets, the European banks remain the largest sector group. However, Asian banks overtook North American banks in 2013 and have continued their strong year-on-year compounded annual growth. There is also a possibility they may overtake European banks in future years as the Australian economy further pivots to Asia.
While the growth of foreign bank activity in Australia was slower in 2020 than in previous years, foreign banks continued to increase their presence in Australia despite the turmoil caused by major events that threatened the investment landscape throughout the world.
In many cases, market activity paused for a period of time during 2020 but restarted before the end of the year. Banks now find themselves in a fortunate situation with money to invest and opportunities to explore. In 2020, businesses were focused mainly on survival. Now momentum is building as businesses start to recover and repay loans to banks, governments provide incentives for business spending and growth, and funds with capital to spend are looking for opportunities to invest.
The growth of foreign banks provides some additional competition to major domestic banks in certain key focus sectors such as infrastructure and property but this is of course in the context of the Australian banks completely dwarfing the foreign banks in terms of scale.
The increased presence of foreign banks in Australia reflects overall long-term confidence in Australia’s economy, governance and opportunities for growth. As global economies shift to ‘recovery mode’, MinterEllison anticipates more opportunities and increased foreign bank growth.
The high confidence in Australia as an investment destination is expected to continue. The long-term trend is year-on-year growth and there is nothing to suggest this will change.
Looking ahead, some volatility is likely to continue as markets around the world shift and recover from the economic slowdown and market uncertainty at different paces. Overall, however, the foreign bank activity paints a positive picture of capital flow into Australia.
With increased government stimulus, customers embracing digital solutions and Australia offering a relatively stable market, there will be plenty of opportunities ahead.
John Elias is Partner and Foreign Bank Tracker Lead Partner & Jeremy Blackshaw is International Managing Partner at MinterEllison