NAB to do business in Asia

The banks are responding to the need for Australian companies to expand throughout Asia.

Owen Raszkiewicz

Owen Raszkiewicz is a Motley Fool Contributor. Owen has been a Contributor since 2013, having also spent time as a Fool writer/analyst. He also worked as an Investment Analyst at Zenith Investment Partners, Australia's top research house specialising in managed funds. Owen has appeared on Channel 10's The Project and was invited on the BBC. He holds a Masters of Applied Finance, Masters of Financial Planning, Bachelor of Technology, Advanced Diploma of Financial Services and Diploma of Mortgage Broking Management. In addition, Owen has passed Level 1 of the Chartered Financial Analyst (CFA) Program. He has taken the Banking + Finance Oath (BFO). When he is not writing, Owen is Managing Director of Rask Finance, an Australian financial education company. You can email him: [email protected].

Published August 13, 2013 11:32 am AEST

National Australia Bank (ASX: NAB) has joined ANZ (ASX: ANZ) and Westpac (ASX: WBC) in recognising the potential of trade flows to and from Asia.

The ANZ is Australia's premier bank when it comes to offshore expansion. Even former NAB boss Don Argus said it's doing a "pretty good job". However NAB business chief Joseph Healy told the Australian Financial Review that although the bank did not want to compete with banks in Asia like ANZ, it will instead focus on "supporting the trade and capital flows between Australia and New Zealand and the various Asian banks".

Mr Healy did not disclose any numbers or figures on the banks Asian strategy. However rivals ANZ and Westpac have done just that. ANZ previously said its APEA division is on track to delivering 25%-30% of revenue for the group by 2017 whereas Westpac said it will increase its revenue drawn from Asia to $750 million in five years.

NAB's track record of overseas expansion has been troubled in past years but the company hopes its steady approach to investment will make its expansion more successful than its UK venture. The bank previously announced it will cut $800 million in costs over five years and will inject the funds into its Asian operations.

NAB's Asia chief executive, Spiro Pappas, has said it will use its huge share of Australian farmers that bank with them to do a majority of its business in the region. "Roughly one-in-three farmers in Australia bank with us. That is very powerful," Mr Pappas said.

Foolish takeaway

With the exception of ANZ, the big banks draw more than 75% of revenues from Australia and New Zealand. Westpac and Commonwealth Bank (ASX: CBA) earn more than 95% of revenue from domestic markets and have focused largely on mortgages but growth is running out. Their most recent profits are a result of cost cutting rather than growth and this Fool thinks investors should be cautious when buying their stocks at current prices.

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Motley Fool contributor Owen Raszkiewicz owns shares in ANZ.

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