Asia banking on expansion

Institutions are crossing borders to serve millions of marginalized clients and the new super-rich

As a growing and increasingly affluent consumer class emerges across most of Asia, regional banks are focusing on extending their reach.

Banks from almost every country in east and south Asia are planning to expand on their home turf and regionally. The largest banks from Japan, the Chinese mainland, Hong Kong, Singapore, Indonesia and Malaysia are even looking to expand globally.

In Japan, banks' cash vaults fulled up as a result of economic stimulus and a stock market rally last year. Mitsubishi UFJ Financial Group, Mizuho Financial Group and Sumitomo Mitsui Financial Group all saw their profits spike.

Last November, the governor of the Philippines' central bank, Amando Tetangco Jr, says the country's big players have to prepare to compete regionally as the Qualified ASEAN Banks (which will be given equal status to domestic banks across the bloc) will have the option to operate regionally after 2015.

Maybank of Malaysia, Bangkok Bank and United Overseas Bank of Singapore are among the strongest regional players within the Association of Southeast Asian Nations, according to the Asian Development Bank.

Global banks like Citibank, HSBC and Standard Chartered have even greater regional coverage. All of them have sought to expand both within Asia and in China while fomenting links between the two.

Bangkok Bank, the largest bank in Thailand by assets, plans to open a branch in Cambodia and will look at opening branches in other countries, including more in Vietnam.

Things have been a bit more difficult for banks in South Korea, which have struggled to be more profitable in an environment of pervasively low interest rates. Kookmin Bank, the largest in the country, closed 55 branches in January.

South Korea's Financial Supervisory Service says the total net income at private and State-run banks was 4 trillion won ($3.85 billion) in 2013, about half the net income in 2012.

Standard Chartered's performance in South Korea helped lower profits at the global bank by 16.7 percent in 2013 from a year earlier to $3.99 billion. The bank's income in the country fell 12 percent while it rose 8 percent in the Chinese mainland and generally rose 6 percent across the Asia-Pacific region.

"We do not expect to deliver double-digit income growth over the next couple of years, given various pressures, not least (South) Korea," says Peter Sands, Standard Chartered's chief executive, in a statement in March.

But even in South Korea, banks are expanding, although in other areas. Hana Financial Group, for example, says it plans to merge its two credit card services to make them more profitable.

Banks in Asia are expanding among the rich and the less affluent.

At one end of the financial scale, banks are looking to expand among the growing population of the region's wealthy.

Some time this year, the Asia Pacific will become home to the largest concentration of high-net-worth individuals in the world. The number of rich people in the region has grown by about a third since 2007, much faster than the rest of the world, according to RBC Wealth Management, a Canadian bank.

There are around 4 million HNWIs in the Asia Pacific who, by next year, should control almost $16 trillion in assets.

Around half of the region's total is estimated to be in Japan; more than 160,000 are in South Korea; China is moving toward three quarters of a million.

Banks are also looking to expand on the other end of the affluence scale.

Asian banks are reaching out to the 600 million people around the region that do not have access to banking services. According to the World Bank, which did a huge global study of access to financial services in 2012, 45 percent of adults in the region says they did not have a bank account.

The numbers vary a lot from country to country. The Global Financial Inclusion Indicators suggest only 4 percent of adults in Cambodia have a bank account, while more than 60 percent have one in Malaysia and the Chinese mainland.

The unserved market of hundreds of millions of people is a powerful incentive for banks to expand.