According to the latest study entitled “Business Strategy: Banking Consolidation in Asia/Pacific – Which Banks Are Most Likely to Succeed in 2010?” by IDC Financial Insights, the Asia/Pacific banking sector will see a notable increase in mergers, acquisitions and consolidation activities in 2010.
The study has revealed that, as signs of recovery from the global financial crisis gathers momentum, Asia/Pacific banks will emerge more aggressive in gaining size through inorganic growth and will feel more confident in revisiting regionalization plans.
According to IDC, in 2010, governments across the region are expected to play prominent roles in banking consolidation. The influence of the government is already seen through recently launched subsidies and tax incentives supporting industry consolidation, new guidelines governing mergers and acquisitions, as well as new financial sector master plans.
Another important trend to note is the emergence of Asia/Pacific super-regional banks. Despite adverse conditions, these banks have become more aggressive and are steadily building a franchise beyond their home markets. The banks’ regionalization strategies however rely on regional units that are close in proximity, and limited to one part of the region. The report cites the super-regional strategies of ANZ Bank (Australia), Commonwealth Bank of Australia (Australia), OCBC Bank (Singapore), DBS Bank (Singapore), OCBC Bank (Singapore), Maybank (Malaysia) and CIMB Group (Malaysia).
Michael Araneta, senior consulting and research manager at IDC Financial Insights Asia/Pacific, said: “The merger and consolidation trends that we expect in 2010 will transform the industry. For one, we will see increasing market share concentration among top-tier institutions. Large banks will get more dominant and have greater pricing advantage. To some extent, it will be difficult for niche banks to thrive.
“Thailand and Malaysia are coming up with new financial sector master plans soon, but other markets like Taiwan, Vietnam, and India are introducing salient changes to rules governing banking competition. These master plans aim to lift the efficiency and competitiveness of the industry typically by encouraging consolidation and by opening up the sector to a greater number of new or foreign players.
“Interestingly, the rise of super-regionals has occurred just as international players retreated from the region or have offloaded shares in specific banks. While we expect super-regional organizations to fill in some of the vacuum left by the global players, we believe that super-regionals are creating their own unique propositions as truly Asia-centric powerhouses.
“Technology vendors should consider the rise of super-regionals as an important trend, not only because of the potentially huge uplift in IT budgets but also because it will necessitate more ‘regional’ sales and marketing strategies. Vendor incumbents in other markets will have to build their presence and domain expertise in the super-regional’s home base.”
IDC Financial Insights is a Framingham, Massachusetts-based provider of independent research, custom consulting, and advisory services focusing on the business, technology and operational issues, within the financial services community.
