One bright sign is that profits have been maintained in some centres, notes Mr Ramos. HSBC is still making a 15.5 per cent return on equity - that of its Hang Seng Bank subsidiary in Hong Kong is 14 per cent. OCBC in Singapore is making 8 per cent, which is not bad given the high level of capital there. Bank of the Philippine Islands made a 17 per cent return in 1998. Thanks to consolidation at the national level and the withdrawal of Japanese banks from the loan market, good institutions can still make money in Asia.
Banking is one of the few sectors in Asia that has real earnings power.
Yet, some commercial banks now believe the future lies in greater emphasis on retail banking. Not only has demand for credit fallen, says David Eldon, Hong Kong head of HSBC, but the crisis has so far failed to produce a much-needed improvement in corporate openness and transparency, and that is a deterrent to commercial lending. In the post-crisis world a small number of international banks is expected to emerge focusing heavily on upmarket retail business in the region. To HSBC, must be added the name of Citibank in this category, and possibly DBS of Singapore, which has already bought into Thai Danu bank in Thailand. These banks will face competition from the leading local retail operators in individual countries.