While Europe thinks, Asia moves

UK banks ignore Asia at their peril, warns SIR WILLIAM PURVES, left, former Group Chairman of HSBC. The veteran banker came out of retirement to be honoured with an Institute Lifetime Achievement Award at this year’s Chartered Banker dinner in April. He took time out to tell CASPIAN WOODS about the challenges of the East.

Should UK banks be worrying about Asia? Of course they should. Growth in Asia is far faster than in Europe. You’ve also got to be where new things are happening, and the ‘young thinking’ is. Sadly, that’s not in Europe.

China still has a bit to go, but Asia is producing technology as good as anything produced in America. There are more Chinese and Indians in Silicon Valley than there are Americans, and they’re taking their knowledge back to Bangalore and what have you.

The Scottish banks had gone into Asia, but sadly they’ve had to sell most of it off. That’s a huge setback for Britain.

Of course, it’s not so easy to do. It doesn’t matter if the opportunities lie in China or Vietnam, getting licenses and being allowed to use them is not easy. Once you are established it’s not easy to make a profit, even if they do allow you to remit it. It’s the same for those from the industrial world who’ve gone into China. Some have been very successful, but they still say ‘Gosh, it’s difficult to make profits!’

It’s a challenge. If you can make a profit at home, some ask why should you bother? Capital is scarce nowadays. If regulators are going to demand more capital and liquidity, then banks in Europe are going to find it very difficult to expand there. If you open a branch in China, you’ve got to assign something like $10m to each branch. HSBC has 100 branches in China, and I don’t suppose they’re yet getting a return commensurate with that investment.

If you’re going to try and develop opportunities, then you’ve got to choose the right people to go out there. They have to be prepared to get stuck in and not be put off by initial difficulties. The same people have got to appear time and time again.

There’s no use chopping and changing, particularly in China, because it takes you three or four meetings before you get through the front door. But you’ve got to be where the action is. Michael Geoghegan, the HSBC Group Chief Executive, has relocated his office to Hong Kong.

You’ve got to find people whose families are going to be happy to live there. There is pollution in some areas, and some people with children don’t like it. There are financial services people in Hong Kong whose families are living in Singapore or Manila, and they’re commuting. Let’s face it, there’s no harm and no hardship living in most of Asia today. In my day, you just put up with things like that.

Because of the failure of the (World Trade Organization) Doha trade negotiations, countries are now doing bilateral agreements. While Europe sits contemplating its navel, Asia is getting on with its own thing.

I think a common currency in parts of Asia is very likely to happen. The central banks there are supporting each other all the time. We’re still some years away from convertibility in China, but how many? I used to say 20 years, but that was ten years ago. There are some who think it might come more quickly. With the reserves they have, and the uncertainties of our currencies, I would have thought that they might gradually make a move.

So can European banks afford to ignore Asia? I think they do so at their peril.

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