>Multi Strategy Banks | Asia (NOMURA)

● Government help needed to overcome bunker mentality: Risk aversion and capital preservation are driving the psychology in the boardroom for most Asian banks. Fear dominates. Banks with rich parents will grow, in our view, while family-owned banks may (wisely) hold off to maintain value in the event of future M&A.

● The leverage gap between West and East should narrow: We estimate that Western banks’ leverage should drop substantially over a multi-year period, while Asian banks’ leverage will rise. A 1pp drop in leverage for them requires a drop of US$1.5tn in assets. Asian banks can create US$2tn in assets if they increase leverage to 20x, on our estimates.

● Consolidation needed to replace damaged: Western banks Weaker Asian players will likely be weeded out or merge. Bigger banks should emerge to offer quality, size and scale of financial services.

● Government spending programmes will buoy banks: In the meantime, governments in Asia are trying to fill the void in the short term by embarking on fiscal spending programmes in excess of US$750bn over the next two years. This should act as a tailwind for bank profitability throughout 2009, especially in China.

● Personalities will drive decisions: We believe the personalities to watch are Liu Mingkang (CBRC), Ben Hung (Standard Chartered), Hwang Young-Key (BK Financial), Richard
Stanley (DBS), Nazir Tun Abdul Razak (CIMB) and Jeffrey Koo (Chinatrust)

To see full report: ASIA BANKS