Pace of Mergers and Acquisitions Among Banks in Asia/Pacific to Swing Wildly in 2012, says IDC Financial Insights
Singapore and Hong Kong – January 10, 2012 - The Asia/Pacific banking industry will see consolidation quicken in some markets, even as financial institutions in general will reconsider inorganic growth amidst the weak economic forecasts for 2012. This was revealed in a recently published report by IDC Financial Insights that investigates the various drivers that spur mergers and acquisitions (M&As) or similar corporate actions among banks in 12 Asia/Pacific markets. More insights are revealed in the report, “Business Strategy: Mergers, Acquisitions, and Consolidation in Asia Pacific Banking – Where Are the Hot Spots?” (Doc # FIN231313).
"We do not expect a frantic race to complete M&A deals across multiple countries," says Michael Araneta, Associate Consulting and Research Director at IDC Financial Insights Asia/Pacific. "Instead, we believe that such activities will be dictated by opportunism. The right pricing, alignment of stakeholder intentions, value creation, regulatory approvals, and post-merger scale will be crucial considerations. Still, there will be a great opportunity for game-changing realignment of market strength if banks execute their M&A strategies well."
The report highlights several markets that will see more liberalization policies that foster greater competition in their respective banking industries. In this regard, India's increasingly open environment and China's loosening controls on foreign participation make them the most likely markets to witness the entry of new competitors. These new players will either use acquisitions or more traditional organic growth to build their scale. Furthermore, countries like Malaysia and Australia are granting licenses to new market players. The report also cites continued expansion of branch networks in China, Philippines and Vietnam and to a lesser degree, in Malaysia and Thailand, all underscoring how organic growth can still be a credible growth strategy for many banks in the region.
Sui-Jon Ho, Market Analyst at IDC Financial Insights Asia/Pacific states, "The dilution of protectionism has foreign players contending on more equal ground with local banks, despite domestic institutions holding significant pricing and scale advantage." Sui-Jon continues, "Furthermore, we see Asia/Pacific-based institutions that are slowly but surely building region-wide platforms, with units operating in multiple jurisdictions. These so-called Asian super-regionals are becoming credible competitors to global players such as Citi, UBS, Credit Suisse, HSBC, and Standard Chartered Bank."
Meanwhile, the importance of capital conversation made more pervasive by the uncertainties in the global financial system is making banks think twice about potentially capital-draining M&A activity. However, concerns about capital and liquidity can also promote M&As in two scenarios. Institutions that are particularly reliant on wholesale funding might be encouraged to use M&As to increase their retail deposit base and thus, have better access to cheaper sources of funds. This is a relevant scenario for banks in Australia, South Korea, Malaysia, and Taiwan.
On the other hand, in countries like Indonesia, the Philippines, and India, lower-tier lenders and domestic institutions with small balance sheets will be encouraged to merge, supported by fiscal incentives and considerations of post-merger synergies. Araneta states, "Ironically, there might be no better time than the present for such underdogs to bulk up and close the competitive gap."
Table 1 presents key consolidation trends cited in the 12 Asia/Pacific markets covered in the report.
For more information about this report, “Business Strategy: Mergers, Acquisitions, and Consolidation in Asia Pacific Banking – Where Are the Hot Spots?” (Doc # FIN231313), please contact Sheryl Fuertez at +65-6829-7758 or sfuertez @idc.com. To set up an interview with Michael Araneta, contact Lay Fang Tan at firstname.lastname@example.org.
About IDC Financial Insights
IDC Financial Insights assists financial service businesses and IT leaders, as well as the suppliers who serve them, in making more effective technology decisions by providing accurate, timely, and insightful fact-based research and consulting services. Staffed by senior analysts with decades of industry experience, our global research analyzes and advises on business and technology issues facing the banking, insurance, and securities and investments industries. International Data Corporation (IDC) is the premier global provider of market intelligence, advisory services, and events for the information technology market. IDC is a subsidiary of IDG, the world’s leading technology, media, research, and events company. For more information, please visit www.idc-fi.com, email email@example.com, or call 508-620-5533. Visit the IDC Financial Insights Community at http://idc-insights-community.com/financial.
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