UPDATE 1-Bank N.Y. sees more M&A chances in Europe than Asia

Mon Oct 26, 2009 11:40pm EDT

* European financial restructuring offers M&A opportunities

* Waiting for final approval of China licences

* Deal to buy Britain's Insight to close by early Nov (Adds quotes, details, background)

By Michael Wei and Alan Wheatley

BEIJING, Oct 27 (Reuters) - Bank of New York Mellon Corp (BK.N) sees more acquisition opportunities in Europe than in Asia, the head of the world's largest custodian of financial assets said on Tuesday.

Robert Kelly, the bank's chairman and chief executive, said European financial institutions had been harder hit by the global economic crisis than their counterparts in Asia and were refocusing their businesses as a consequence.

Banks in the United States were in a better position to mount takeovers in Europe after going through a government-led process of consolidation and capital raising, Kelly told reporters.

"What you will see in coming quarters is that U.S. financial markets and banks are stronger than the European banks now," he said.

If some European banks were to sell businesses to raise capital, the New York-based bank would be interested in buying, he said.

Dutch bancassurer ING (ING.AS) said on Monday it would split in two, transforming itself into a smaller European lender in the most striking example yet of the deep changes that European Union policymakers want to force on banks that received state aid. [ID:nLQ54845]

In Asia-Pacific, by contrast, Bank of New York Mellon prefers to expand through joint ventures or organic growth, not acquisitions, Kelly said. That is because most financial firms in the region are not in the process of overhauling their business lines as they were largely untouched by the crisis.

Kelly said the bank was in the final stages of obtaining regulatory approval in China for its planned fund management joint venture with Xi'an-based Western Securities, in which it will hold a 49 percent stake, the maximum allowed.

BNY Mellon is also awaiting approval for a full-financial services licence in China, a process that is on the last lap, Kelly added.

"We see fabulous potential in the Chinese market over the long term," he said. "We are not here to make money in the short term. It is a long-term investment."

BNY Mellon aims to generate half of its profits outside the Unites States within three to five years, up from roughly one third now, Kelly said.

He said he hoped the bank's acquisition of Insight Investment Management from Britain's Lloyds Banking Group PLC (LLOY.L), announced in August, would close in early November.

The bank, which focuses on securities services for institutional clients and asset management, stayed profitable through the financial crisis and remains flush with cash for acquisitions. [ID:nL1252678]

The bank was among the first cleared to repay U.S. government bailout funds, returning $3 billion to the Troubled Asset Relief Program (TARP), which allows it to make M&A deals. (Editing by Ken Wills)

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