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Chinese banks may play a minor role in international finance, but that is set to change dramatically, according to Peter Guenthardt, one of Bank of America's top investment bankers in Asia.

Former UBS investment banker Peter Guenthardt has been in Asia since last year for Bank of America Merrill Lynch, or BofA. In Singapore, Guenthardt is the American bank's country head as well as responsible for southeast Asia. Guenthardt predicts that the influence of Chinese banks is set to rise dramatically in coming years – at the expense of Europe.  

Chinese firms like Industrial and Commercial Bank China, or ICBC, China Construction Bank, or CCB, and Agricultural Bank China, or ABC, still live a somewhat isolated existence in finance. While they are active and enjoy hefty support from Chinese authorities, they remain in the shadows of industry giants like J.P. Morgan, Goldman Sachs, UBS or BofA. Bot not for much longer.

Absorbing Losses

Guenthardt, who was poached from the Swiss bank three years ago, says the growth of Chinese banks is akin to that of Wall Street firms 50 years ago. «China's big banks are growing along with Chinese firms as they expand abroad. Just as American banks and did with corporations,» the Swiss banker says. Chinese firms have been particularly active recently, including takeovers such as Swiss agrochemical firm Syngenta by ChemChina.

The ex-UBS veteran also notes what is widely ignored in the west: Chinese firms are hauling profits; ICBC alone earned $40 billion last year. «They can absorb any credit losses without a problem,» Guenthardt says. 

This is the critical difference to European investment banks, which are grappling with much lower profitability. UBS earned 3.3 billion francs last year; in better years, the Swiss bank earned up to 10 billion francs.

Pressured Europeans

Guenthardt fears that Europe's investment banks won't survive the long-term in China: they lack the necessary resources to compete with powerful U.S. competitors and flourishing Chinese firms. The Middle Kingdom's largest banks, strategically supported by the government and subsidized if necessary, have no liquidity issues to speak of.

Swiss banks' big chance? Wealth management, according to Guenthardt. Swiss know-how is still in hot demand in the Chinese market, especially as entrepreneurs diversify their funds – meaning, bring them offshore.