MinterEllison has launched the ninth edition of the Foreign Bank Tracker report, a market-leading publication that provides insights into which countries’ investors are waxing or waning their interest in the Australian market. Foreign bank activity often acts as a proxy for offshore investment trends because foreign banks typically follow their customers into jurisdictions.

Highlights from this edition

• Europe and Asia exhibit growth in Australia, broadly in line with Australian GDP in 2023, and materially faster than the Australian major banks, and North American-based banks;
• North America contracts for second consecutive year; and
• Asia now has more banking institutions operating in Australia than Europe and North America combined.

In 2023, interest rate risks were realised through rapid cumulative increases across developed markets. Generally, large global banks benefited from investors seeking to move deposits to stronger institutions. This did not apply across the board, and the regulator-brokered acquisition of Credit Suisse by UBS, was a notable banking event in 2023 with UBS under both its UBS and Credit Suisse licences shrinking their Australian balance sheets.

Some well-known US money-centre banks, including JPMorgan Chase, Citi and State Street also reduced their Australian balance sheets for the second consecutive year.

Europe and Asia exhibit growth and North America contracts for second consecutive year

“Overall, European and Asian-based banks have shown their continued confidence in Australia with strong investment during 2023, which speaks to Australia's stability as a destination for capital", said MinterEllison Partner John Elias. "In aggregate, European and Asian-based banks grew by $15.9bn in 2023, expanding the gap of total resident assets to North American-based banks, which declined by $14.2bn," he said.

"North America has now seen two consecutive years of contraction. This is not unprecedented, with European banks reducing their total resident assets for five consecutive years following the Global Financial Crisis,” said MinterEllison partner, Amela McPherson.

"This is likely not a reflection on the confidence foreign banks have in Australia as a safe haven for investors, but more due to a strategy to have tighter control over capital while there is global market stress,” she said.

North America contracts

North American based foreign banks represent just 18% of foreign bank assets, the lowest proportion since 2009 in the aftermath of the global financial crisis. North America as a region has the smallest total of resident assets held by foreign banks.

Asian growth

Over the past two decades, Asian-based foreign banks have maintained a 17% compound annual growth rate in resident assets held, and now account for 36% of all assets held by foreign banks in Australia, up from 6% in 2003 and 22% in 2013. Currently, 29 banking licences are held by Asian banking organisations operating in Australia. This is up from nine in 2003 and 19 in 2013.

European banks with domestic subsidiaries dominate

European banks still hold 46% of all resident assets held by foreign banks, however this is down from 63% in 2002 and 57% in 2013. There was a considerable difference in growth from banks with sizeable domestic retail subsidiaries, including those from the Netherlands (ING and Rabobank) and the UK (HSBC), which delivered better than mid-single digit growth (also achieving the largest growth by dollar value of resident assets) and the growth achieved by banks from other European countries.