| HONG KONG
HONG KONG Jan 18 Southeast Asia bank
acquisitions are set for a record year of volumes with more than
$20 billion worth of deals in the pipeline and buyers from Qatar
to Japan expected to be interested in a piece of the region's
Among the factors fuelling the activity are U.S. and
European shareholders cashing out of high-value stakes, Asian
buyers seeking to expand beyond their home market and a regional
banking market that, despite rapid economic growth, remains
Those factors, building over the last few years, have set
the table for a potentially active year for deal junkies from
Singapore to Kuala Lumpur, to Jakarta and Bangkok.
The amount of active and expected bank M&A deals in
Southeast Asia in 2013 could be worth more than $21 billion,
overtaking the record of $16.9 billion set in 2001, according to
Thomson Reuters data.
"In the ASEAN banking sector, there is a willingness on the
seller's part to realise value, and the buyers can justify the
price more easily because of the fundamentals involved," said a
Singapore-based M&A banker, who declined to be identified
because he was not authorised to speak publicly on the matter.
The strong line-up of suitors for Rabobank's Indonesian
business underscores foreign banks' appetite for doing deals in
the region. At least three banks, including Commonwealth Bank of
Australia Ltd, Industrial and Commercial Bank of China
Ltd and Qatar National Bank, are expected to
place first-round bids for the unit in what is likely to be a
$400 million deal.
"This part of the world offers such tremendous growth
potential and is a natural place for banks from Japan,
Australia, South Korea and China to invest," said James Ankers,
co-Head of Financial Institutions in Asia at Rothschild. "It
makes sense for them to make this region their first port of
Other targets include TPG-backed Indonesian lender Bank
Tabungan Pensiunan Nasional Tbk Pt (BTPN), which
sources say could kick off in the first half of this year, as
the private equity firm's lock-up expires in March. Micro
finance-focused lender BTPN has a $3.2 billion market value and
an exit by TPG would trigger a takeover of the whole bank,
U.S. conglomerate General Electric is in the process
of selling its remaining 25.3 percent stake in Thailand's No.5
lender, Bank of Ayudhya. That could trigger a bid for
the entire bank, valued at $6.6 billion. Japan's biggest bank,
Mitsubishi UFJ Financial Group, is among the banks
interested in buying GE's stake, Reuters has previously
Vietnam and Malaysia are two other areas on the radar this
year for more bank deals.
Southeast Asia, home to 600 million people, is forecast by
Swiss banking group Julius Baer to boast nearly half a million
millionaires by 2015 with investible wealth of $2.2 trillion,
creating fertile ground for banks at a time when growth in
Western markets is seen limited.
Yet the proportion of working age individuals with bank
accounts in Southeast Asia pales compared with that in the
This ratio sits at 20 percent in Indonesia and Vietnam and
10 percent in Cambodia, while it is above 60 percent in Thailand
and Malaysia, according to the U.S. Agency for International
Development. Countries such as Australia and New Zealand have
nearly 100 percent financial reach.
But launching a bank sale and completing one in Southeast
Asia are two different things.
Foreign ownership restrictions exist in most Southeast Asian
markets, which poses challenges to outside buyers.
Most Southeast Asian countries prohibit foreign banks from
owning a majority stake in domestic banks, though central banks
make exceptions in certain cases.
Indonesia last year issued new guidelines, capping foreign
ownership in local banks at 40 percent. In Thailand, foreign
banks need Ministry of Finance approval to own control of
domestic banks. Malaysia has set a 30 percent limit, though the
government has said it is open to giving greater stakes in some
"The new shareholding regulation does allow for control, it
just takes a bit of time. It is not putting Indonesia in the
same bracket as say Vietnam or Malaysia, where there are more
rigid shareholding limits. Evidence has shown it hasn't entirely
diluted demand," Rothschild's Ankers added.
The region also is famously volatile, so the bullish view on
bank deals this year could change overnight if a currency drops,
an industry fails or a government collapses.
"To be fair, there is a lot of talk and processes, but not
many deals happening or closing. The regulatory structures of
ownership and single presence policy is complicated, making it
hard for deals to be done," said the Singapore M&A banker.
The tough regulatory climate hasn't stopped investment banks
from building up their Southeast Asia banking teams, however, in
the hope that the consolidation wave will soon take hold.
Strong economic growth in the 10-member ASEAN bloc is
fuelling loan growth, and also increasing demand for wealth and
insurance products -- factors adding to the list of reasons
foreign and domestic bank buyers want a bigger piece of that
Southeast Asian banks trade at a premium to their Asian and
global peers. On average, Southeast Asian banks trade at a
price-to-book ratio of 2.7, compared with the Asian average of
1.79. That fact is what makes GE, Rabobank and TPG comfortable
in selling now, while prices are high. By comparison, nearly all
major U.S. banks trade below their book value.
"There is going to be a substantial increase in deal
volumes, irrespective of ownership restrictions or regulatory
capital issues," said a Hong Kong-based M&A banker, who was not
allowed to speak publicly about the matter. "There is some sense
of stability and optimism creeping back, mainly due to the stock
market rally. And with that CEO confidence will return."