A slowdown in near-term transaction volume is anticipated in 2020. Simplified business models leading to divestments, regulatory-driven consolidation to enhance the stability of domestic banking sectors, takeover of troubled banks, and emerging NPL portfolio opportunities however are trends which could drive local and inbound interest.


There’s potential for transaction volumes to be buoyant as regulatory complexity causes banks to rationalize their business models. In the wake of the report of the Royal Commission into Misconduct in the banking sector, major banks and financial institutions are divesting non-core businesses like wealth management, financial advice and insurance. While divestments might be delayed until 2021, the trend to simplify banking business models presents opportunities for non-bank,insurance and PE buyers.


Tier II/III local commercial banks are contemplating IPOs, strategic investments and perpetual bond issuance to meet the rising need for greater capital buffers. Meanwhile, the government takeover of troubled banks is likely to continue. Further restructuring and M&A opportunities are expected as smaller regional banks are experiencing increased NPL ratios. The good news for foreign companies and investors is the emergence of a cohesive regulatory framework designed to protect consumer interests and economic stability. This could ease the barriers to inbound M&A in the medium-term.

Despite the economic impacts of COVID-19, we anticipate deal activities in ASEAN to improve. Banks are looking to strengthen their capital base for new lending and to support emerging NPLs and continued interest is being shown by PE and other VCs in non-bank financial institutions, payments and emerging fintech and platform businesses supporting the stability of the banking sector across the region, as well as the emerging lending opportunities arising from infrastructure and new supply chains and financial inclusion across the region.

Stephen Bates
Partner, Deal Advisory Financial Services
KPMG in Singapore


The second half of 2020 is likely to be an extremely active year for banking M&A, driven by confidence capital raise during/post COVID-19, policy and regulatory changes (like the insolvency law for financial services companies). Several restructuring opportunities might be the result, including: mergers of weaker banks and small finance banks into universal banks; strategic investments by PE in weaker banks; divestment of non-core assets by banks (especially their stakes in insurance companies); distressed sales of weaker non-banking finance companies; and, increased primary market movements, driven by small finance banks and PE backed midsized-to-large lending institutions.


Several factors have come together to further accelerate the number of bank deals, delayed but widened by COVID-19. These include challenged regional banks, partnerships with fintech players, historically low sector valuations and support from Japan’s Financial Services Agency (FSA). The immediate impact of COVID-19 on the banking sector is an increasing need for liquidity to support both the corporate and retail sectors, possibly resulting in temporary softening of FSA stances, while accumulated damages to bank sectors’ balance sheets would deepen and widen consolidation moves in the medium term. Outbound investments may continue, mainly into Asian banks and non-banks together with strong interest in the US regional banks by major Japanese players, seeking US dollar funding capability, although intervened or delayed to some extent by COVID-19. A key priority for the banking sector is to develop a sustainable business model.

South East Asia

Though dependent on foreign ownership restrictions, several regional Asian banks are looking to grow their presence by helping consolidate Indonesia’s banks and injecting new capital into Vietnam and Myanmar. Some international banks continue to exit minority and strategic stakes in banks across the region, offering opportunities for deals. The Monetary Authority of Singapore (MAS) plans to issue up to five virtual banking licenses to Singapore-headquartered companies, which could spur collaboration/joint ventures to meet capital requirements and further boost interest in regional challenger-banking. Thai banks, which have been increasingly active in regional deals, are increasingly cautious in the wake of uncertainties in the export, tourism and real estate markets. Investments in fintech and digitization are being prioritized and are expected to accelerate and may be supplemented with opportunistic purchases in consumer finance. Given the heavy reliance on the hospitality sector in Indonesia, stress in some banks could emerge later in 2020. Domestic banking consolidation remains key in Indonesia with in-country transactions dominating the deal landscape due to a large number of smaller regional banks. In Malaysia, further medium-term industry consolidation is expected as the number of local banks have reduced from the current 10 players. COVID-19 has delayed the digital banking license process in Malaysia. However, the competitive landscape is still expected to expand.

Stay up to date with what matters to you

Gain access to personalized content based on your interests by signing up today

Sign up today

Connect with us


Want to do business with KPMG?


loading image Request for proposal