Asia's banks are likely to step in with loans and boost their presence across the region as the credit crisis has forced big Western rivals to retreat.
With the exception of Japanese lenders, domestic banks are poised to steal market share in Asia from Royal Bank of Scotland, Citigroup and others with big government stakes.
Standard Chartered Plc and HSBC Holdings Plc, London-based but Asia-focused, are among those expected to seize on opportunities in corporate lending, trade finance and loan syndication.
DBS Group and United Overseas Bank, Singapore's top two banks, and Australia & New Zealand Banking Group, all still relatively well capitalized, are also angling for the big corporate loans that were once the territory of global, Western banks.
On the commercial banking, plain vanilla stuff, I do think there will be a clear benefit to the domestic players, said Sunil Garg, Asia bank analyst at JP Morgan in Hong Kong.
So, if RBS or Citi is less active, for example, in providing loans in the corporate sector or trade finance, then I think some of that business will go to local players.
However, any expansion in Asia will be tempered by caution, as lenders are wary of spending too much capital and as rising bankruptcies spark higher bad-loan costs.
Hit by losses on toxic investments, both RBS and Citigroup have taken hefty government bailouts. Bank of America and UBS, also recipients of state aid, have, like RBS, sold stakes in Chinese banks as they try to shore up capital at home.
For RBS, its future in Asia is uncertain. The bank is selling its Asian retail and commercial banking business, and keeping its investment banking units. ANZ and Standard Chartered are among those considering bids for the Asia assets, sources have said.
RBS will remain an international bank and we will continue to lend in our key markets, one of which is Asia-Pacific, said Yuk Min Hui, a spokeswoman for the bank in Hong Kong.
STILL IN THE GAME
Citigroup is still winning underwriting and advisory mandates in Asia, where it has built a wide network and earned large profits over the years. And it continues to lend to big clients.
This week it was among lenders on a S$1.08 billion ($711 million) loan facility for Singapore Telecommunications. It has also been reported to be working on loan refinancing for India's Tata Motors Ltd.
We continue to commit capital to key clients and are also helping them to access the capital markets, said Benjamin Ng, managing director and head of syndicate and acquisition finance for Citigroup in Asia Pacific.
But uncertainty weighs on the U.S. firm as well, in part because of the U.S. government's new role at the bank. Whether Washington D.C. will endorse Citi expansion efforts in Asia remains unclear. Citigroup recently merged its Asian commercial and investment banking groups.
Citi is still there, but of course everyone is waiting to see what happens. So, yes, there's a gap in the market and I think we're the obvious contender to fill it, ANZ CEO Mike Smith told a news conference in Hong Kong last week.
Smith said he wants to fill spaces that may be left by Citigroup, especially in areas such as trade finance.
STEALING A MARCH
As of last week, Citigroup was the fourth-largest mandated arranger of syndicated loans in Japan so far this year, according to Thomson Reuters LPC data, though the amount it arranged fell 40 percent from a year earlier, steeper than the decline at Japan's big banks.
RBS last year ranked No.9 in Asia-Pacific, excluding Japan, as mandated arranger for project finance loans, according to Thomson Reuters data. Like other banks, it has yet to arrange a project finance loan in the region this year.
ANZ was the second-largest mandated arranger in Asia-Pacific, excluding Japan, last year. Standard Chartered ranked No.14.
While there is market share to gain for smaller, domestic banks, the climate is tough.
Asian banks may be more cautious, as increased overseas lending is causing a rise in bad loans, said Ismael Pili, an analyst at Macquarie Capital Securities in Tokyo.
Not everyone is able to fill the void.
Japan's big banks, such as Mitsubishi UFJ Financial Group and Sumitomo Mitsui Financial Group, initially looked like the winners in Asian lending, as they ramped up loans in 2008. But they have since been caught out by massive losses on their share portfolios and have had to raise about $25 billion in new funds to shore up their balance sheets.
That's put the squeeze on overseas loan growth, Japanese bankers say.
Still, there are likely to be plenty of opportunities for banks that are still well capitalized, said Jason Rogers, a credit analyst at Barclays Capital in Singapore.
If you are a large corporate, an investment-grade corporate, your funding alternatives have narrowed. And many corporates that may have used (global banks) in the past will be looking more toward the local banks, he said.
I think there are going to be some opportunities there for banks across the region to upgrade the quality of their loan books and the quality of their lending.
(Editing by Ian Geoghegan)