Asia sees more financial mergers

Asia sees more financial mergers

SINGAPORE (DPA): Asia's financial sectors will see more mergers and acquisitions as cash-rich Singapore institutions seek to expand and Hong Kong banks are forced to consolidate, a leading U.S. investment firm said on Thursday.

"Changing profit dynamics and market liberalization should heighten merger and acquisition activity," said a report from Salomon Smith Barney (SSB).

The report noted domestic consolidation is imminent in Hong Kong, but the well-capitalized banks in the city-state "are aggressively seeking cross-border expansion ... in the current climate of increasing globalization."

"No Asian franchise, however large, is immune from being an acquisition target," SSB said.

With some 265 authorized institutions, Hong Kong is "over- banked" and fragmented, the report said, while reasons for mergers in Singapore are different.

"Changes in the profit equation and a mature market are forcing change nonetheless" in the city-state, said SSB.

The report said change had resulted from liberalization of the banking sector, a mature loans market estimated to grow at an annual pace of 6 to 7 percent, lower interest margins and rising costs as banks are forced to make more technology investments to enhance fee- based income.

The country's five local banking groups, DBS Group Holdings, OCBC Bank, United Overseas Bank, Overseas Union Bank and Keppel TatLee Bank, have so far chosen the regional expansion route.