M&A in ASEAN highly attractive for Gulf banks

There is remarkable activity going on in Southeast Asia with regard to mergers and acquisitions in the banking sector. Bank acquisitions are set for a record year of volumes with more than $20 billion worth of deals in the pipeline in 2013, and buyers from Qatar to Japan expected to be interested in a piece of the region’s financial institutions.

By Arno Maierbrugger

The latest example was the Qatar National Bank’s interest in Dutch Rabobank’s Indonesian operations. According to media reports, QNB is said to be among the bidders to buy Rabobank’s Indonesian unit in a $400 million deal, competing with other bidder such as the Commonwealth Bank of Australia and the Industrial and Commercial Bank of China.

This is a strong line-up and shows the rising interest of foreign banks to cash in on Southeast Asia’s growing demand for financial services, especially in Indonesia, a country of 240 million people of which approximately around 80 per cent of people in the working age don’t have bank accounts, let alone private insurance, access to loans or credit cards. In Cambodia, the ratio is even at 90 per cent, in Thailand or Malaysia still at 40 per cent of people without access to banking services, a study by the US Agency for International Development has found.

Other current M&A targets in Indonesia include Bank Tabungan Pensiunan Nasional, a financial institution focused on micro finance with $3.2 billion market value.

Vietnam and Thailand are also on the radar this year for more bank deals. In Vietnam, shares of banks are now cheap as the sector is struggling with a high debt burden and non-performing loans from state-related entities. Japanese investors are already hunting for Vietnamese banks’ shares, in particular for Vietnam’s Sacombank, and, reportedly, sovereign wealth funds from the Gulf are also looking around what’s on offer.

In Thailand, General Electric is in the process of selling its remaining 25.3 per cent stake in the country’s fifth largest lender, Bank of Ayudhya, which could trigger a bid for the entire bank, valued at $6.6 billion.

Not only the low penetration of bank accounts in the 600-million-people region of ASEAN is a favourable prerequisite for foreign takeovers, it is also the rising demand for wealth management and related services such as securities services, brokerage and asset management. Swiss banking group Julius Baer has said that the region is expected to boast nearly half a million millionaires by 2015 with investible wealth of $2.2 trillion.

And, equally important, is the fact that the growing Islamic banking sector in the ASEAN region is in need for new strategies especially in the field of liquidity management, where Gulf banks could lend their expertise. Malaysia, being an unchallenged global leader in Islamic banking and finance, is well positioned to develop a new model of Islamic banking, which can be supported by the experience and financial power of Gulf banks either through mergers or new partnerships, bringing the practice of Islamic banks closer to the real economic transactions and enhance their influence on the global financial market.

This comment is Inside investor’s weekly contribution to Qatar’s leading newspaper Gulf Times and is published every Sunday.

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