SINGAPORE: Independent research and advisory firm Financial Insights, an IDC company, notes, in a report that assesses opportunities for banks in the current crisis environment, that banks' strategic IT initiatives had been realigned to reflect the opportunities in the market.

Despite tight budgets, banks would still spend on technologies that allow them to blunt the adverse effects of the crisis, build business despite the slowdown, and operate efficiently in a crisis environment.

For example, while banks need to continue investing in origination solutions for loan expansion, they also need to invest strategically in modeling and analytics. Investments in scoring, modeling, and analytics would help in key areas such as decisioning, pricing, servicing, fraud prevention, and even collections and recovery.

Financial Insights' new study, "Asia/Pacific Banking in 2009: Opportunities Amid A Crisis", highlights pockets of growth in lending in several Asia/Pacific markets, shifts in customer deposits which allow aggressive banks to gain market share, and opportunities for generating fee income.

Michael Araneta, senior research manager, Financial Insights Asia/Pacific, said: ''A thorough review of the market reveals some opportunities for revenue growth, and for further expansion of customer base and product portfolios despite the economic crisis. The environment however is by no means bright and rosy, and significant risks need to be considered.

"Market conditions are volatile, causing opportunities to shift quickly. The game will be won by those agile and capable enough to execute strategies efficiently."

Highlights of this report include:

Even before the escalation of the financial crisis, Asia/Pacific banks were already projecting a slowdown in lending for 2009. Financial Insights have revised downwards the estimated average loan growth for 12 key Asia/Pacific markets to 8.7 percent. However, there are still significant drivers for lending growth that need to be considered.

These include government mandates and interventions, dwindling international funding options, microfinance, and moves by aggressive players to win market share from weakened rivals.

Deposit mobilisation will proceed impressively in under-banked countries like India (where industry deposit growth is expected to be at about 20 percent year-on-year in 2009) and Vietnam (estimated to be 11 percent). In most other Asia/Pacific markets however, it will be about acquiring market share from competing banks, or attracting customers away from savings and investment alternatives.

 

While some fee income sources like corporate finance, underwriting, credit cards and wealth management sales would be affected by the market slowdown, opportunities to generate service-based fees, such as those charged on transaction accounts, fund transfers and cash management, will remain robust. New strategies will need to consider the ideal mix of fee income sources that the bank is able to support.

The figure below presents Financial Insights' estimates of loan growth in India, Vietnam, China and Indonesia. These four countries are expected to show the highest rates of loan growth in 2009 compared to other Asia/Pacific markets.

Figure 1

''New business objectives and requirements are being used to justify traditional technology projects like core banking upgrades. The chase for deposits will hopefully help rebuild the momentum for core banking system projects in the medium term. Business and IT teams will consider the scalability of their current core systems as the bank's deposit base expands, and as new deposit products need to be brought to market,'' Araneta added.

''Overall, the financial crisis is expected to bring risk management back into focus. Technology teams should be ready to address risk management issues related to their work, including risks inherent in technologies under implementation, project implementation issues, as well as risks associated with vendors and technology partners,'' Araneta added.

Source: IDC