Asia Pacific bank M&A transactions totalled $13.9b in 2013

By Wendy Weng

Domestic deals dominated bank merger and acquisition activity in the region in 2013, while intra-regional and inter-regional deals also saw a significant increase.

Asia Pacific has seen a decline in merger and acquisition (M&A) activity in the banking sector over the past two years. Reasons for the drop include a dearth of mega deals, such as the acquisition of Sumitomo Trust & Banking by Chuo Mitsui Trust Holdings for $9.4 billion in Japan in 2011, and a tougher regulatory environment, which led to DBS Group dropping a bid for Bank Danamon Indonesia.

However, Asia Pacific is still more active than other regions in M&A activity. Along with stronger economic growth and an expanding demand for financial services in the region, prospects for Asia Pacific banks’ M&A activity remain robust.

Asia Pacific M&A activity remains higher than other regions

Figure 1. Total bank M&A value in Asia Pacific region (2011-2013)

In 2013, total value of completed bank M&A deals fell 9.2% to $13.86 billion (from $15.27 billion in 2012) – a second consecutive drop, following a 19% decrease in 2012 from $18.83 billion in 2011. The acquisition of BOS International (Australia) by Wesptac Banking Corporation, expected to be closed by end 2013, was finally completed on January 2nd, 2014.

Investors are more open to acquiring minority stakes or /assets on a portfolio basis. “In the past many acquiring banks insisted on acquiring a controlling stake, now they find it acceptable to acquire minority stakes, taking into consideration the potential strong growth combined with the limited entry points in most markets across Southeast Asia,” said Patrick Hanna, financial services partner at EY. In 2013, the acquisition of minority stakes accounted for 55% by deal volume, up from 49% in 2012 and 33% in 2011.

In the period under review, domestic deals continued to dominate bank M&A activity in the region, while intra-regional and inter-regional deals also rose.

Among intra-regional and inter-regional transactions, most of the targets were banking institutions in fast-growing South and Southeast Asia, especially in India, Indonesia and Vietnam. South and Southeast Asia contributed 84% and 65% to total M&A deal volume and value, respectively.

Bank M&A activity in Japan dropped sharply in 2012, compared to a year earlier, when domestic M&A contributed almost 75% to total deal value in Asia Pacific. Its market share was 13.3% at the end of 2013. Compared to their counterparts in Asia Pacific, banking institutions in Japan have shown more interest in cross-border deals, especially in ASEAN countries.

Domestic deals dominate bank M&A activity in the region

Figure 2. Breakdown of bank M&A activities by deal value and volume (Domestic vs. Intra-regional vs. Inter-regional)

In terms of transaction value M&A deals, South Korea came out on top with deals worth $5.9 billion, ahead of Thailand, with $5.3 billion worth of deals, while China was placed third. However, the market share of South Korea, Thailand and China by deal volume was 9.6%, 1.2% and 4.8% respectively, much lower than 24.1% for India, due to some high value transactions.

While South Korea came out on top in bank M&A deal value, its market share was lower than that of India in terms of deal volume                    

Figure 3. Banking sector completed M&A deal value by country     Figure 4. Banking sector completed M&A deal volume by country

The third largest deal in the period under review was the acquisition of Korea Exchange Bank by Hana Financial Group. However, the combined value of the five deals that Hana Financial Group took over from Korea Exchange Bank was $5.72 billion and would thus supercede the Bank of Ayudhya deal as the largest bank M&A deal.

In addition to the formally announced deals, there are a number of potential deals on the table. For instance, Societe Generale is looking to sell its Asia private banking /assets, worth an estimated $600 million, ING is selling its 31% stake in Thailand’s TMB Bank worth $1.2 billion, while stakes in Hong Kong’s Wing Hang Bank, valued at up to $5.2 billion, and Chong Hing Bank worth $1.5 billion, are also up for sale. Once formalised, these deals will significantly increase the M&A pipeline in the coming year.


See also:

- Comprehensive data on the strongest banks in the Asia Pacific region

Asia Pacific Strongest Bank Balance Sheets

*Asian Banker Research offers extensive insight into individual countries and banks for over 80 banks in the Asia Pacific region, combining key financial data with an in-depth assessment of each bank’s main businesses, as well as detailed information on technology infrastructure, risk management frameworks and leadership strategy. Click here to learn more.

Categories: Asia Pacific, Databook, Industry Outlook, Investor Audit, Mergers and Acquisitions
Keywords: Bank Danamon, DBS, Bank of Ayudhya, BTMU, BOS International (Australia), Wesptac, Korea Exchange Bank, Hana Financial Group, Societe Generale, TMB Bank, ING, Wing Hang Bank, Chong Hing Bank
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