Bank M&A in Asia – a Decade in Review

Several countries are pushing for more M&A in Asian banking as a way to ameliorate risks (India) or to possibly compete more regionally (Malaysia), with even some rumours resurfacing of further activity in Australia. We have reviewed all major banking transactions in the Asia Pacific region over the past 10 years which involved consolidation and we summarise our findings below.

Summary findings

We find that most banks lose market share after a merger when we consider total assets. This is usually due to depositors moving to reduce concentration risk and loan rationalisation by the merged entity.

Overlapping banks allow for more synergies and there tends to be better performance, especially if management is able to achieve the synergistic gains quickly. Mergers aimed more at revenue synergies or entering new markets appear to have lukewarm benefits.

A long drawn out merger process with unambitious long term synergistic benefits are penalised by markets. Delays can be cultural, labour union led, government led or legal.

Clearly the lead in any transaction tends to impose their will on the combined entity. We find that performance suggests that investors are better owing targets rather than acquirers.