National sponsor MinterEllison, has produced its fifth Foreign Bank Tracker Report which examines capital flow trends into Australia via foreign banks and provides market analysis of the results.
The report reveals interesting patterns of capital investment into Australia showing a continued expansion of foreign banks in our domestic marketplace.
In particular, the report identifies three highlights:
European investment was back on the table
Following a prolonged period of quiet and uncertainty, European banks stood out this year with a 24% rate of growth – the highest of all the regions. With renewed confidence and certainty following Brexit, European – and particularly UK-based investors – were poised for action, and keen to look further afield.
Asian bank growth was consistently strong
Asian bank growth continued their pattern of acceleration, growing to a 17% rate of growth in 2019. Asia is a consistently strong investor in Australia, and with 28 Asian banks operating in Australia, all Asian countries grew resident assets at effectively double digit growth rates.
Emerging market issues are set to have a major impact
Emerging global issues in 2020 are set to have a profound effect on the market and capital flow into Australia and around the world. We’re seeing unprecedented impacts of the COVID-19 pandemic, which has emerged as a major operational challenge for all businesses. Foreign businesses such as foreign banks are facing travel restrictions and disruptions from the need to quarantine individuals. Additionally, the supply and demand disruption created by COVID-19 has generated cashflow volatility for many businesses, adding an additional layer of difficulty to credit assessment. It has also changed risk appetites, leading to changes in the availability of credit. In addition, reduced oil prices and climate change concerns, exacerbated by the Australian bushfire crisis, have provided additional challenges for investors. The long term impact of these challenges is yet to be seen. However, as countries start to recover and stabilise, we expect to see a flurry of activity as funds look to invest in businesses. Looking ahead, we expect foreign banks to continue to expand in Australia, despite significant headwinds.
Download Report full here: https://www.minterellison.com/articles/foreign-bank-tracker