Foreign Bank Tracker 2022 | Revealing capital flow trends into Australia

3 minute read + PDF download  26.07.2022 John Elias, Michael Lawson

Now in its seventh year, our report explores the capital flow trends into Australia via foreign banks. Informed by statistics from APRA and our experience with global and domestic clients, we look at the current state of the market and offer predictions about future investment into Australia.

Despite another year of great disruption, our 2022 Foreign Bank Tracker shows foreign banks continuing to expand their Australian presence. The foreign banks reported better than expected growth over the past year, particularly when taking into consideration two years of uncertainty due to COVID-19 restrictions and related challenges.

Investment from Asia remained stable but with little growth due largely to flat growth in China. However, there was some from European markets and high growth from North America. Primary resources in Australia are strong, stable and always attractive – and we expect that to continue. This is evidenced by the foreign banks' continued investment in Australia’s agribusiness sector, complemented by confidence in the commercial property and renewable energy sectors.

Find out more about foreign bank activity and capital flow trends in Australia.

Total resident assets held by foreign banks in Australia

European banks have the most resident assets of foreign banks, followed by Asian banks and North American banks.

Over the past year, North American banks in Australia have been the fastest growing of banks from the three different regions.

Three trends in foreign banks

Border restrictions keeping new foreign bank entrants down

There were limited new approvals for ADI licences during 2021. The closed Australian border would have further limited the opening of foreign banks. The only foreign entrant was Barclays Bank, re-obtaining its foreign authorised deposit taking (banking) licence in Australia on 20 December 2021.

Consolidation set to shake up 2022’s figures

The sale of Citi’s Australian retail assets to National Australia Bank will shake up the foreign bank figures for the year ahead. Citigroup Pty Ltd, which holds these retail assets (discrete from the local branch of Citibank NA), was the eighth largest foreign bank in the country by net resident assets at 31 December 2021. It represented 3.8% of the foreign bank resident assets in Australia; having fallen from 4% over the year. Despite this pullback by Citi, US banks expanded strongly in Australia during 2021, with JP Morgan more than doubling its resident assets in Australia, and Bank of America increasing its resident assets by around a third.

Fintechs enter the market – as a potential forerunner to local banking operations

Block’s acquisition of Afterpay was the largest successful public M&A transaction in Australian history. Afterpay had already established a strong consumer setup and payments technology service prior to its acquisition by Block, which offered payment apps including Square, Cash App, Spiral and TIDAL. Furthermore, prior to the merger with Afterpay, Australia was Square’s second largest market after the US.

The data we explored in this report around foreign bank activity and capital flows paints a far more positive picture than many would have anticipated. There are challenges – regulatory hurdles including FIRB and ACCC requirements and managing multiple state jurisdictions, for example. Inflationary pressures will also have an impact as interest rates go up. However, the story of foreign bank investment in Australia remains positive.

Find out more about the state of foreign banks in Australia.

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