The shine is coming off southeast Asia – the golden child of banking after the global financial crisis – as valuations tumble and competition for funding heats up across the region.
The battle for funding is only going to get tougher once the U.S. Federal Reserve begins in earnest to taper its massive supply of cheap US dollars to the world's financial markets. Amid slowing regional economies, debt-fueled high asset prices and wild currency swings, banks are battening down the hatches for a rough ride.
CIMB, Malaysia's largest bank by assets, has launched a $1.1 billion capital raising to defend against the decline in profits coming from Indonesia, according to analysts, where it has a big presence through its ownership of Bank Niaga and where the local currency has tumbled.
Others are looking to buy their way to better funding prospects and into China's stronger economic growth. OCBC, Singapore's second-largest bank by assets, is in talks to spend about $5 billion on Hong Kong's Wing Hang Bank, which has a loyal local deposit base and access to the growing off-shore renminbi market. A deal would also double OCBC's China branches to about 30.
"If you take the top tier out of each market – HSBC, Standard Chartered and maybe DBS – then everyone else is pushing up against deposit ceilings and that is going to be the big constraint this year," said one analyst who declined to be named.