Tags: Asian | Finance | Deals | Powerhouses

Report: Asian Finance Deals May Build Powerhouses

Wednesday, 21 Jul 2010 09:40 AM

Asia's quick recovery from the global economic slump could spur a buying spree among local banks, insurance companies and other financial institutions that will create super regional players, PriceWaterhouse Coopers said Wednesday.

The consultancy firm said in a report that the global economic shakeout in the past two years had paved the way for financially stable Asian institutions to scout for opportunities, as troubled Western banks sold or scaled down their operations in the region.

It said mergers and acquisitions among Asia's financial institutions are expected to increase in the next 12 months, led by regional banks based in Australia, Singapore and Malaysia who had shelved expansion plans amid the global crisis.

"The storm clouds that previously engulfed the merger and acquisition markets are lifting and we expect to see significant increase in the breadth of deal activity in the next year," said Sridharan Nair, financial services partner at PwC Malaysia.

The report said the number of financial services deals announced in Asia-Pacific decreased by 12 percent in 2009 from the year before to 499 — mostly in banking and insurance — from 567 in 2008. The total deal value fell by 13 percent to $70 billion, with deals concentrated in Japan, Australia, China and Taiwan.

Most of the transactions last year involved the sale of Asian-based assets by U.S. and European firms, it said. Citigroup and Bank of America sold more than $7 billion of their Asian banking operations, while American International Group, Dutch bank ING and the Royal Bank of Scotland each divested $3 billion of businesses in the region.

In contrast, the report said Asia's top banks such as Australia and New Zealand Banking Group Ltd., Singapore's OCBC Bank and DBS Bank, Malaysia's Maybank and CIMB Group, as well as Japan's Mitsui Sumitomo Insurance Group and Tokio Marine Holdings had taken the opportunity to buy as they race to expand regionally.

"As the dust of the crisis settles, we see these institutions gaining strength to compete against massive players such as HSBC and Standard Chartered Bank," it said.

PwC said it foresaw further financial services liberalization in Asia to spur mergers and acquisitions.

Soo Hoo Khoon Yean, financial services partner with PwC Malaysia, said countries likely to see the highest number of new players in the sector are China, India, Malaysia and Indonesia.

However, he said opportunities for acquisition may become limited as the economic recovery strengthens further, with more willing buyers than sellers in the industry. A gap in price expectations between buyers and sellers may also hinder deals, he said.

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