Regulators are looking to consolidate banking sectors across the region and increase overall provisions. In Australia, the recent conclusion of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, is likely to see major banks continue to review their business models, which could see further divestments in non‑core businesses. Meanwhile, the continued severe business environment is forcing regional banks in Japan to rethink their strategies, including M&A with other banks. In Indonesia, while financial regulators are encouraging consolidation as there are too many banks, thus making regulatory supervision coverage problematic, foreign ownership limits are not being relaxed. A 2012 Central Bank Regulation capped foreign ownership at 40 percent; however, majority investments are being approved on certain conditions, one being that the acquiring party merges two Indonesian banks. Notwithstanding this, the country is attracting Japanese, Korean and Chinese banks as investors. Additionally, in China, opening up of the financial system is arousing intense investor interest, which should see inbound deals increase from 2019 onwards.
Bancassurance M&A in the region should continue to thrive in 2019. The low penetration rate of both banking and insurance products across ASEAN economies opens up great opportunities for banks and insurers developing their bancassurance models. New digital-enabled entrants from consumer-focused businesses are emerging and making deals in this space.
"Given continued macroeconomic growth and corresponding trends supporting financial inclusion across banking and insurance, we expect ASPAC financial services deal volumes to grow." - Stephen Bates, Partner, Deal Advisory Financial Services, KPMG in Singapore
Southeast Asia is poised to be the center of the action in the next few years. Amid a potential US–China trade friction and currency uncertainties, ASEAN banks are well-placed with profitability largely stable, increasing asset quality and sufficient capital levels. The region has a large population, relatively similar macroeconomics across countries, large underbanked populations and a significant number of citizens overseas. All of this makes Southeast Asia an attractive stepping-stone, hence growing interest from both regional banks and fintech players seeking to expand. We expect fund flows from North Asia (covering the countries, territories and jurisdictions of China, Taiwan, Japan and South Korea). In the banking space, Indonesia is expected to be very active, followed by Vietnam, Thailand and the Philippines. Singapore will continue to be a hub for sovereign and PE funds investing across the region, and with strong support from the Monetary Authority of Singapore (MAS), Singapore will continue to drive regional fintech collaboration and is the leading destination for fintech start-ups and innovation labs and venture capital.