门口的野蛮人数字银行牌照对香港、新加坡及澳洲的影响

1、Global Research5 March 2020BankTech Bulletin #2Barbarians at the Gate? The impact of digital bank licences in Hong Kong, Singapore and AustraliaIntroducing the BankTech BulletinThis is the second BankTech Bulletin, a series of notes profiling businesses, events and issues providing sign-posts to the

2、 medium-term disruption of big banking. We favour being concise and focusing on business models with the potential to really change modern banking. Our framework for evaluating the long term future of todays big banks was laid out in our global Q Series, here. Our first Bulletin, which featured the

3、new deposit platforms operated by Flagstone, Interactive Investors, Monzo, Raisin, Hargreaves Lansdown and Wealthfront that allow challenger banks more cost- effective funding, is here.Regulators propose increased competition in banking in several key markets Regulators in Hong Kong, Singapore and A

4、ustralia have followed the UK in drafting new rules to increase bank competition by encouraging the registration of new players. All three markets are very profitable for incumbents (Hong Kong was 54% of HSBCs PBT off 30% of group loans in 2019) and important to defending group ROEs as Fed and other

5、 central bank rate cuts threaten interest margins. Understanding how the licences work and the limits they include is key to figuring out how much of a risk these launches many of which are due in 2020 imply.Have you met the rest of the team? You might recognise some of the parents Its also importan

6、t to see how well funded and connected these new players are. Hong Kong licences went to JVs, involving BOCHK, StanChart, Ping An, ICBC, Xiaomi, Tencent, HKEX, PCCW and Jardine Matheson. Media report Singapore applications from Grab, Singtel, Mitsui Sumitomo Insurance and a host of others. AMTD and

7、Ant Financial hold a licence in HK and are reported to have applied in Singapore too.Modest impact near term, potentially crucial later, at an awkward timeThe UK experience suggests customer acquisition and funding costs rather than tech is the key driver of relative success. It will be interesting

8、to see how successful the more networked licencees are in attracting customers at reasonable cost (see Kakao Bank in Korea). Near term it seems unlikely incumbents have a huge amount to fear, but as seen in certain verticals (such as retail FX post Revolut, Transferwise), big banks can suffer revenu

9、e and market share attrition in high-return products without ceding deposit market share. Our analysis of the current and future state of play in Hong Kong, Singapore and Australia is inside: we see this as a big topic in 2020 and beyond.BanksGlobalEquitiesJason Napier, CFAAnalyst HYPERLINK mailto:j

10、ason.napier jason.napier+44-20-7568 5037Aakash Rawat, CFAAnalyst HYPERLINK mailto:aakash.rawat aakash.rawat+65-6495 8283Alex ZhouAnalyst HYPERLINK mailto:alex-huanan.zhou alex-huanan.zhou+852-3712 4218Jonathan MottAnalyst HYPERLINK mailto:jonathan.mott jonathan.mott+61-2-9324 3864Minh PhamAnalyst HY

11、PERLINK mailto:minh-p.pham minh-p.pham+61-2-9324 2119Anna Woodcock Associate Analyst HYPERLINK mailto:anna.woodcock anna.woodcock+61-2-9324 2658 HYPERLINK /investmentresearch /investmentresearchThis report has been prepared by UBS AG London Branch. ANALYST CERTIFICATION AND REQUIRED DISCLOSURES BEGI

12、N ON PAGE 22. UBS does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in maki

13、ng their investment decision.An invitation to the party is keyWhile newer banks and particularly those deploying digital-only service models emphasise the importance of their relatively new tech platforms, a potentially better customer experience, greater speed to market and lower unit operating cos

14、ts, the reality is that all of those things together cannot deliver a viable business if one key ingredient is absent: A regulatory framework conducive to the registration and launch of challenger banks.This note looks at the terms and conditions imposed by regulators in three markets Hong Kong, Sin

15、gapore and Australia which appear to us to be following the UK in making room for greater market participation by digital, virtual or challenger banks and what this could mean for large incumbent players.While we think it makes policy sense to pursue the emergence of a well- capitalised, diverse and

16、 profitable range of banks in any market, fintech players and, to a lesser extent, challengers in the UK have struggled to match large existing firms as far as funding costs, profitability and customer reach are concerned. This has tended to see banks like Aldermore, Shawbrook, Paragon and Close Bro

17、thers focus on higher-spread niche markets such as property development, asset finance, factoring and motor-related lending. Will new joint ventures, backed by some of the largest tech and bank players in the world, do better in Hong Kong (by far the most profitable of HSBCs markets, measured by ret

18、urn on risk-weighted assets and by cost/income ratio) turn out differently HYPERLINK l _bookmark0 (Figure HYPERLINK l _bookmark0 1)?Figure 1: For HSBC, Hong Kong is the most profitable large market, a place where it would like to grow by reinvesting capital released from capital market activities in

19、 Europe and the US. But HSBC isnt the only bank looking to grow here, with eight new virtual banks recently gaining licences to operate (9m ann. adj. RORWA)Bubble size indicates size of RWAs1816Adj. Revenues, $b2Group pre-tax RoRWA 2.8%UK Plc HKChina USMexico France NRFB-1%0%1%2%3%4%5%6

20、%7%8%Pre-tax RoRWASource: Company data. We used 1H19 France P&L and multiplied by 1.5 in the chart above; RWAs for France is 1H19 figureHong Kong: A high-ROTE consolidated market meets eight new digital banksThe Hong Kong Monetary Authority (HKMA) published a draft Guideline on Authorisation of Virt

21、ual Banks (Guideline) for public consultation in Feb 2018 and at the same time began to accept licence applications. This move came as part ofthe HKMAs Smart Banking initiatives, which had been officially launched in September 2017. Smart Banking included initiatives such as the Faster Payment Syste

22、m, enhanced fintech supervision, open APIs and closer cross-border collaboration with the aim of improving the quality of banking products and services in Hong Kong.Figure 2: A timeline of the HKMAs virtual banking initiativeDateEventSep-17HKMA launches the Smart Banking initiativesFeb-18HKMA begins

23、 public consultation on the Guideline on Authorisation of Virtual Banks and opens up for application submissions May-18HKMA publishes revised version of the Guideline following the completion of public consultationDec-18HKMA announces that around 30 applications were received before the Aug deadline

24、 and plans to start granting licences in Q119 Mar-19HKMA grants the 1st batch of three VB licences (Livi VB, SC Digital, ZA), expected to launch services with 6-9 monthsApr-19HKMA grants the 2nd batch of one VB licence (Welab), expected to launch services with 6-9 monthsMay-19HKMA grants the 3rd bat

25、ch of four VB licences (Ant, Fusion, Airstar, Ping An), expected to launch services with 6-9 months Sep-19Reuters reports that virtual banks will delay service launch due to ongoing protestsDec-19ZA Bank starts pilot programme, under the HKMAs Fintech Supervisory Sandbox supervision frameworkSource:

26、 HKMA, ReutersFollowing five months of public consultation the HKMA released the revised Guideline in May 2018, which remained largely the same in terms of key principles. In particular, while some questioned the reasonableness of the expectation that virtual banks should not impose minimum balance

27、requirements or low-balance fees on customers, the HKMA maintained this supervisory expectation on the grounds that a key objective of virtual banking is to promote financial inclusion. The HKMA also kept its minimum paid-up capital requirement of HK$300mn, about US$40m, as stipulated under Hong Kon

28、g banking law.In December 2018, the HKMA announced that around 30 applications for these licences had been received by August but that a third of these had subsequently failed to submit sufficient additional information. The HKMA granted the first batch of three licenses in March 2019, including two

29、 virtual banks backed by JVs, including incumbent local banks, BOCHK and Standard Chartered. In April and May 2019 two further batches of licences were granted for a total of eight.The business plans of these firms assumed a launch within 6 to 9 months after licencing, with the HKMA due to conduct a

30、 comprehensive assessment of the initiative one year after the first virtual banking service is launched.Social unrest in Hong Kong, however, had media reports by September last year confirming a delay to launch proceedings. Only one of the eight virtual banks has launched service so far. ZA Bank, b

31、acked by ZhongAn Online Insurance, began its trial run in December 2019 under the HKMAs Fintech Supervisory Sandbox (FSS) framework, which allows the bank to trial initiatives with a limited number of customers without the need to achieve full compliance with regulatory requirement. At this stage, t

32、he banks are expected to collect data and user feedback to refine their product and services.Wealthy parents: Who owns the first licences?Shareholders behind the first eight licences include high-profile financial and technology companies. Three banks are backed by local incumbents including Livi VB

33、 (BOCHK), SC Digital (Standard Chartered) and Fusion Bank (ICBC Asia).One is owned by the mainland insurance giant Ping An Group. Of the remaining four, three are backed by fintech companies: ZA Bank, Welab Bank and Ant Bank, while Airstar Bank is primarily owned by Xiaomi, a tech company most known

34、 for its hardware. The ownership split of Fusion Bank is unclear to us, though the presence of Tencent, ICBC Asia and Hong Kong Exchange suggest an entity with the resources to scale, if successful.Figure 3: Summary of HKs virtual banks and their shareholdersNameFormer entity/brandLicence dateShareh

35、oldersSectorStakeInitial capitalBOCHKFinancial44%Livi VBMarch 27, 2018JD DigitsInternet36%HK$2.5bnJardine MathesonConglomerate20%Standard CharteredFinancial65%HKTSC Digital SolutionsMarch 27, 2018PCCWTelecom Telecom15%HK$1.6bn10%Ctrip HKInternet10%Zhong An OnlineZA BankZhongAn Virtual FinanceMarch 2

36、7, 2018Fintech51%HK$1.6bnSinolink WorldwideInvestment49%Welab BankWelab DigitalApril 10, 2018WelabFintech100%Airstar BankInsight Fintech HKMay 9, 2018XiaomiTech90%HK$300mnAMTD GroupFinancial10%Ant Bank (Hong Kong)Ant SME Services (Hong Kong)May 9, 2018Ant FinancialFintech100%HK$785mnICBC AsiaFinanci

37、aln.a.Fusion BankInfiniumMay 9, 2018HKEXFinancialn.a.n.a.TencentInternetn.a.HillhouseInvestmentn.a.Ping An OneConnect BankPing An OneConnect CompanyMay 9, 2018Ping An InsuranceFinancial100%n.a.Source: HKMA, company data, HKEJBeyond the intersection of finance and tech partners it is interesting to s

38、ee local banks partnering up with other brick-and-mortar players in Hong Kong as well. Jardine Matheson Group, with 20% of the bank set up with BOCHK, is one of the largest conglomerates in Asia with significant market share in Hong Kongs retail space. PCCW and its subsidiary HKT, with a combined sh

39、are of 25% in SC Digital, are one of the largest teleco service providers in the region. While the HKMA prohibits these new banks from operating physical branches it is reasonable we think to assume that these shareholders could help generate significant offline- to-online synergies with these ventu

40、res if the regulatory hurdles can be met (and helping to reduce the cost of customer acquisition, the key vulnerability of all new fintech players, with Kakao Bank in South Korea the key exception to the rule).Though the initial capital call for registering these banks is small compared with Hong Ko

41、ngs HK$24trn in banking assets, we see these partners as large corporations with the resources to help these businesses grow should they be successful in acquiring customers.Rules of engagement: Key regulatory principlesVirtual banks fall into the licensed banks category under Hong Kongs three-tier

42、banking system and so are allowed to conduct banking businesses as a conventional bank does, including accepting deposits of any size and maturityfrom the public. Accordingly, they also need to comply with all the regulatory requirements applicable to traditional banks.The key difference from tradit

43、ional banks, as per the Guideline, is that virtual banks are not supposed to operate physical branches except for a few local offices to interact with regulators and deal with customer enquiries or complaints. They are also expected to mainly serve individual or SME customers in order to actively pr

44、omote financial inclusion.Also, while the HKMA made it clear in the Guideline that they will not interfere with virtual banks commercial decisions, they explicitly stated that it would be a concern if a virtual bank plans to build market share aggressively by recording substantial losses in the init

45、ial years. The regulator requires virtual banks to present a credible and viable business plan for profitability in the medium term and considers predatory tactics potentially detrimental to systemic banking stability.In its working plan for 2020 the HKMA listed “readiness for launch of services” an

46、d “focus on management of risks” as top priorities concerning virtual banks. We expect the regulator to continue with a prudent approach, likely discouraging pricing strategies that are regarded as too aggressive (though in practice, if right, it will be difficult to set clear guidelines in this reg

47、ard). Given the challenges the city is facing exacerbated by the coronavirus outbreak we think the HKMA will prioritise stability.What does this mean for incumbents?The planned positioning of virtual banks implies increased competition for retail banking in Hong Kong, an area long been seen as highl

48、y profitable despite high customer penetration. Retail banking contributes around half of revenues and profits at some of the largest banks in Hong Kong, with the exception of BOCHK, which has a sizeable corporate banking franchise HYPERLINK l _bookmark1 (Figure 4). The return on retail banking is a

49、lso quite lucrative in in Hong Kong at an ROA of 2.4%-3.3% ROA.Figure 4: Retail banking is a sizeable and profitable business for Hong Kong banksRetail contribution to revenues & PBT, FY19Figure 5: Net interest income accounts for a majority of retail banking revenues60%66%69%74%19%19%16%15%10%36%12

50、%3.5%100%90%3.0%80%2.5%70%2.0%60%Mix of retail banking revenues90%80%70%60%50%40%30%20%10%0%3.26%2.62%2.38%2.46%51% 54%55% 53%44% 47%34%26%HSBC (HK)BOCHKHSBBEA (HK)50%1.5%40%1.0%30%20%0.5%10%0.0%0%HSBC (HK)BOCHKHSBBEA (HK)As a % of revenuesAs a % of PBTPro forma ROA (RHS)Net interest incomeNet fee i

51、ncomeOtherNote: For BOCHK we use FY18 data. ROA estimate assumes a tax rate of 15%. Source: Company data, UBS estimatesNote: For BOCHK we use FY18 data. Source: Company dataOver 60% of revenues are driven by net interest income, a percentage that is higher for firms with leading retail franchises, a

52、n outcome down to high proportions of current account funding and the relatively low rates offered on time deposits HYPERLINK l _bookmark2 (Figure 5).In the early stages of virtual bank development we expect a focus on growing deposit bases. When ZA Bank launched its pilot programme the first and on

53、ly bank to have begun operating as yet what caught most news headlines was its 6.80% preferential time deposit rate. Closer examination of the deal here, however, shows a promotional rate linked to the number of customers brought to the franchise HYPERLINK l _bookmark3 (Figure 6).Figure 6: ZA Banks

54、promotional campaign rewards users who can bring others on to the platform, with eye-catching deposit ratesRankTime deposit reward rateNo. of referrals required#Cut-off dateNo. 1-1006.80%2329-JanNo. 101-2006.00%151-FebNo. 201-3005.80%104-FebNo. 301-4005.60%87-FebNo. 401-5005.40%710-FebNo. 501-7005.2

55、0%613-FebNo. 701-10005.00%416-FebNo. 1001-15004.80%319-FebNo. 1501-20004.50%322-FebSource: Company dataHere we think it makes sense to think about part of this deposit premium as a substitute for marketing and launch costs. The campaign encourages customers to refer friends to ZA Banks platform: the

56、 higher the number of referrals before the cut-off date, the higher the rate they are entitled to receive for a 3-month time deposit up to HK$100,000 when the campaign ends, ranging from 4.5% to 6.8%. To get in to the top 100 and earn the 6.8% rate requires 23 referrals or more while the lowest rank

57、 qualifying for a healthy 4.5% requires just three introductions.For a 3-month time deposit of HK$100,000, a rate of 6.80% translates to HK$1,700 interest expense during the period. Assuming a more normal pricing of 2%, the premium paid amounts to HK$1,200, cost effective for 23 new customers. At th

58、e bottom end of the table, the per capita acquisition costs are lower, with the bank spending up to HK$625 for 4 new users.While the scale of the pilot campaign appears relatively small, we see this as an innovative approach to attract customers. With customer acquisition costs the key issue in all

59、fintech endeavours, we expect to see more such initiatives as other virtual banks launch. Spreading brand awareness is key for these new players.Beyond this launch promotion, however, ZA Banks pricing strategy looks less aggressive. The latest deposit rates suggest a smaller deposit premium relative

60、 to large bank prices than in evidence in the UK HYPERLINK l _bookmark4 (Figure 7).HK$ time deposit preferential ratesFigure 7: ZA Banks offer rates on time deposits are currently slightly higher than that of peers, a lower deposit premium than seen in the UK, for exampleZAHSBCBOCHKHSBSTAN3-month2.0