Bank M&As seen accelerating

BANK MERGERS and acquisitions will accelerate across Southeast Asia given the region’s impending economic integration, industry executives yesterday said.

“The next few years will be a tumultuous time ... characterized by a sharp acceleration of mergers and acquisitions, in some cases driven by market, and in some cases by regulators and governments,” KPMG Asia Pacific Chairman Tham Sai Choy said.

Mr. Tham spoke at a luncheon for Finance Secretary Cesar V. Purisima and visiting Malaysian Second Finance Minister Dato’ Seri Ahmad Husni Hanadzlah.

“ASEAN (Association of Southeast Asian Nations) banks have some way to go in growing to be internationally competitive,” Mr. Tham noted, adding: “Smaller banks are inherently risky, and if enough of them are threatened, the domino effect can ensue and threaten the system as a whole.”

East West Banking Corp. President Antonio C. Moncupa, Jr. echoed this, saying: “When banking industries integrate, inevitably, there will be mergers and acquisitions.”

Local banks, he claimed, still have “time to prepare” as “the competition ... will proceed very slowly”.

“The Philippines has been hosting foreign banks in the last 15, 20 years ... So far, the effect on the domestic financial market has not been that substantial,” Mr. Moncupa said.

While there will be “qualitative shifts” when it comes to the entry of regional banks -- which will operate “just like any domestic commercial bank” under the integration plan -- “there’s enough time for all of us to think and to assess where we should place ourselves”.

KPMG Partner Andrew Tinney, who also took to the podium at the luncheon, described the need to size up as “critical”.

“The key question and challenge, as I see it, is the ability for the banks in ASEAN to really take up that challenge -- to have the size and scale, capabilities, sophistication,” he said.

Last month, ratings agency Standard & Poor’s said that for Philippine banks “greater scale is essential ... to deal with the more intense incoming competition”.

The debt watcher said that consolidation, which the Bangko Sentral ng Pilipinas is urging smaller banks to pursue in light of ASEAN integration in 2015, would “likely improve the system’s competitive dynamics”.

“The number of universal and commercial banks -- which dominate the system with more than an 80% market share -- have remained stubbornly high. We believe the competitive landscape would benefit from having fewer but stronger banks,” S&P noted.

source:  Businessworld