Magazine article American Banker

U.S. Banks Flee from Australia as Losses Mount

Magazine article American Banker

U.S. Banks Flee from Australia as Losses Mount

Article excerpt

U.S. Banks Flee From Australia As Losses Mount

Barely five years after they swept into Australia, U.S. banks are sweeping out.

"U.S. banks are getting slaughtered in Australia," said Kevin Mulvaney, international banking group executive at Bank of Boston Corp. "A lot more will be forced to become specialized or pull out."

The latest casualty is Chase Manhattan Corp., which last month sold its consumer banking operation in Australia to Westpac Banking Corp. Chase's Australian unit lost $120 million last year.

Other U.S. banks have not fared much better. The Australian subsidiaries of Security Pacific Corp. and Citicorp last year lost $207 million and $28 million, respectively, forcing their parents to inject nearly $350 million in capital into the units.

Several U.S. banks have scaled back their Australian presence, including Bank of Boston Corp., Chemical Banking Corp., and BankAmerica Corp.

One Bank Shows Big Profit

In fact, the only U.S. bank that made strong profits in Australia last year was Bankers Trust New York Corp., which earned $96.3 million on some $2 billion in assets. The company's Australian unit focuses on advisory services, asset management, and other off-balance-sheet businesses.

U.S. banks piled into Australia after the government granted foreign institutions banking licenses in 1985. The Americans set up everything from merchant banking and leasing operations to joint ventures with Australian insurance companies and consumer banking franchises.

But competition increased ferociously, and banks embarked on several years of wild corporate and real estate lending. …

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