How Asia's Banks are Changing

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CHANGE CREATES OPPORTUNITY — AND RISK

For investors, the banking sector presents opportunities worth examining. The region’s newfound prosperity means more money is flowing through the banking system—which should translate to more profits for banks if they go about their business the right way. Consumer financial services represent a whole new market, with strong potential for credit, savings and investment products. The small and mid-size business market is a new opportunity, as banks open their vaults to these engines of economic growth.

Still, cautionary signs remain. Non-performing assets continue to hinder performance. While offering credit to a wider set of constituencies is a positive step, too rapid expansion of credit or a lack of proper controls can cause economic overheating. And political and cultural resistance to change still exists.

Whatever the outcomes, however, Asia’s banks are embarked on a transformation from which there is no turning back. The challenge is for banks to embrace change and capitalize on it, and become both drivers and benefactors of Asia’s growth.

Not surprisingly, the biggest changes and the biggest challenges are taking place in the region’s largest market: China.