The Star Online
Wednesday November 23, 2011
KUALA LUMPUR: Mergers and acquisitions (M&As) will continue to dominate the local banking sector moving forward, as rising competition and additional capital requirement regulations will drive banks to merge and become bigger entities in survive, said Soo Hoo Khoon Yen, partner at PricewaterhouseCoopers (PwC).
“Capital regulations can be a double-edged sword. More capital requirements by the central bank and the authorities mean that this business (of running the bank) is only for people and institutions with deep pockets.
“It can be very difficult to fulfil capital requirements, and at the same time sustain a decent profit,” Soo said.
He said this would be the push factor to cause the smaller players to be acquired by the bigger players in the finance industry, as the smaller players would not be able to cope with the additional capital requirements.
Speaking to reporters after the presentation of PwC’s recent survey yesterday, Soo said the local banking industry could also garner attention from regional banks in their quest to go global.
This fear of being bought over by foreigners, he said, could be mitigated through regulators who could scuttle the deal or by regulators further encouraging a consolidation of the industry to build economies of scale.
“The proposed Australian Securities Exchange’s merger with the Singapore stock exchange was an example of how regulators can cause a deal to be called off. The game play this time is to deal with regulators first before approaching a deal rather than dealing with regulators after the deal has been proposed,” Soo said.
He added that increased economies of scale could elevate the appeal of the banking sector in the face of the trend of growing regionalisation in the banking industry worldwide.
Its survey, “Emerging Opportunities: Financial Services M&AW in Asia 2011,” which was conducted among senior executives with decision-making powers showed that over 80% of respondents in Malaysia predicted higher M&A activities next year and nearly half or 49% were considering an M&A deal at present.
“In general, over 50% of the total respondents expect to be either involved in a deal or (are) considering one over the next 12 months,” PwC said in a statement.
“Capital regulations can be a double-edged sword. More capital requirements by the central bank and the authorities mean that this business (of running the bank) is only for people and institutions with deep pockets.
“It can be very difficult to fulfil capital requirements, and at the same time sustain a decent profit,” Soo said.
He said this would be the push factor to cause the smaller players to be acquired by the bigger players in the finance industry, as the smaller players would not be able to cope with the additional capital requirements.
Speaking to reporters after the presentation of PwC’s recent survey yesterday, Soo said the local banking industry could also garner attention from regional banks in their quest to go global.
This fear of being bought over by foreigners, he said, could be mitigated through regulators who could scuttle the deal or by regulators further encouraging a consolidation of the industry to build economies of scale.
“The proposed Australian Securities Exchange’s merger with the Singapore stock exchange was an example of how regulators can cause a deal to be called off. The game play this time is to deal with regulators first before approaching a deal rather than dealing with regulators after the deal has been proposed,” Soo said.
He added that increased economies of scale could elevate the appeal of the banking sector in the face of the trend of growing regionalisation in the banking industry worldwide.
Its survey, “Emerging Opportunities: Financial Services M&AW in Asia 2011,” which was conducted among senior executives with decision-making powers showed that over 80% of respondents in Malaysia predicted higher M&A activities next year and nearly half or 49% were considering an M&A deal at present.
“In general, over 50% of the total respondents expect to be either involved in a deal or (are) considering one over the next 12 months,” PwC said in a statement.
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