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The GBA offers the banking industry significant opportunities for transformation and growth, according to KPMG report

More domestic and foreign investors are expected to set up new banks or invest in Chinese banks in the region
2019-06-05 16:24 1782

HONG KONG, June 5, 2019 /PRNewswire/ -- M&A, fund-raising, wealth management, digitalization and policy in the Greater Bay Area (GBA) are all significant drivers for the future growth of the banking industry in the region according to KPMG China's Greater Bay Area Banking report.

The report discusses the development trends and challenges for the banking industry in the region, exploring the unique needs of the GBA and the resultant opportunities by focusing on three aspects: innovation, business development and regulatory control. It identifies ten development trends in the industry, with suggestions on how banks can take advantage of opportunities in the region. KPMG believes that these opportunities will drive more domestic and foreign investors to set up new banks or invest in Chinese banks in the region. 

With the development of the GBA being a key strategy for the future growth of the region, KPMG has identified ten major trends which are helping transform the banking industry in the area:

  • an acceleration in listing and fundraising plans in the region
  • increasing cross-border capital flows and the need for wealth management
  • increasing integration of resources between traditional banking and fintech
  • the rapid development of RMB cross-border settlement business
  • an increasing number of rural commercial banks expanding through strategic M&A
  • continued expansion of foreign banks in the region and strengthened cooperation between foreign banks and domestic banks
  • a rise in commercial banks setting up wealth management subsidiaries
  • accelerating digital transformation
  • a rise in the disposal of non-performing assets
  • the banking industry as a whole, taking advantage of GBA policies and resources

Currently, of the 12 large joint-stock banks in China, China Merchants Bank, Ping An Bank and China Guangfa Bank have headquarters in the GBA and are playing a major role in the development of the GBA's financial system. In addition, provincial commercial banks including Bank of Guangzhou, Bank of Dongguan, Guangdong Nanyue Bank, China Resources Bank of Zhuhai and Guandong Huaxing Bank already have branches in the region. Under the framework of the GBA, by leveraging Shenzhen's technological advantages, Hong Kong's financial experience and the markets of Guangdong, Hong Kong and Macau, KPMG believes the synergy between technology and finance will enable the banking industry to enjoy huge development opportunities brought on by the development of fintech. 

Ivan Li, Head of Financial Services, Southern China, said: "Huge demand from infrastructure funding, an increasing need for asset management, off-shore and on-shore business development, and the two-wheel drive of "Technology + Finance", have brought crucial development opportunities to the banking industry in the GBA. Meanwhile, as the GBA gains momentum, we expect that more domestic and foreign investors will be attracted to setting up new banks or investing in Chinese banks in the region."

Honson To, Chairman, KPMG China and Asia Pacific, added: "As the Belt and Road initiative continues to advance, the GBA will become a core hub for its development. The financial services industry, in particular the banking sector, is set to stand out as a key beneficiary of the GBA's development. As such, it is important that the GBA fully leverages its distinctive advantages to deepen its collaborative ties with countries along the Belt and Road route in the financial services sector, and work together towards the goal of developing the GBA into an important pillar for the Belt and Road strategy."

KPMG China believes that the banking industry should capture opportunities arising from the need for financing in the GBA and provide a full range of financial services and capital support. The firm highlights three key aspects banks should address: innovation, business development and regulatory control.

  • In terms of innovation, banks in the region should accelerate the pace of fintech infrastructure development and adoption of technology, fostering integration between technology and business. Commercial banks should be proactively engaging in this transformation strategy and driving the digitalization of their physical branches, strengthening the operating model and service process flow, and in turn enhancing the core competencies of banks. Digital transformation enables banks to offer a smart banking experience to their customers and better address the needs of the long-tail customer base, compared to the traditional banking model.
  • Thanks to the technological adeptness and industrial advantages in the GBA an open and interconnected regional innovation regime is being established. Chong Hing Bank in Hong Kong, Guangdong Huaxing Bank and Macau Chinese Bank have formed a strategic collaboration, with the goal of enhancing the cross-border service standards of all three banks. M&A has become an important direction for major banks to achieve transformation and growth in business performance. At the same time, Internet finance, VR and AI technology have become hot industries.
  • In terms of regulatory control, some local banks in the GBA may need to meet stricter regulatory requirements for capital adequacy standards and capital management. Commercial banks should establish digital thinking and a more focused management approach based on accumulated data, emphasizing internal controls and compliance for their key businesses, people and operations. It is also important to boost their ability to manage data and ensure data security. China is leveraging Hong Kong and Macau to build an open economy and position the two cities as key regional locations for an interactive platform and cross-border hub, facilitating collaboration and technological innovation with overseas entities.

Shi Jian, Head of Banking at KPMG China, concluded: "China's banking industry has maintained solid earnings momentum since 2018, with a strong uptick in growth. Commercial banks have been calibrating their strategies to simultaneously carry forward business transformation and innovation. With the GBA's continuous integration, accelerated pace of development and progress towards opening-up, commercial banks in the area are facing notable changes in terms of strategies, business planning, product positioning, risk control and compliance management."

About KPMG China

KPMG member firms and its affiliates operating in mainland China, Hong Kong and Macau are collectively referred to as "KPMG China". KPMG China is based in 22 offices across 20 cities with around 12,000 partners and staff in Beijing, Changsha, Chengdu, Chongqing, Foshan, Fuzhou, Guangzhou, Haikou, Hangzhou, Nanjing, Qingdao, Shanghai, Shenyang, Shenzhen, Tianjin, Wuhan, Xiamen, Xi'an, Hong Kong SAR and Macau SAR. Working collaboratively across all these offices, KPMG China can deploy experienced professionals efficiently, wherever our client is located.

KPMG is a global network of professional services firms providing Audit, Tax and Advisory services. We operate in 153 countries and territories and have 207,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such. In 1992, KPMG became the first international accounting network to be granted a joint venture licence in mainland China. KPMG was also the first among the Big Four in mainland China to convert from a joint venture to a special general partnership, as of 1 August 2012. Additionally, the Hong Kong firm can trace its origins to 1945. This early commitment to this market, together with an unwavering focus on quality, has been the foundation for accumulated industry experience, and is reflected in KPMG's appointment for multi-disciplinary services (including audit, tax and advisory) by some of China's most prestigious companies.

Source: KPMG