Asia Pacific banking consolidation to intensify in 2010, Says IDC Financial Insights

January 5, 2010 – The Asia/Pacific banking sector will see a notable increase in mergers, acquisitions and consolidation activities in 2010, according to the latest study by IDC Financial Insights Asia/Pacific. As signs of recovery from the global financial crisis gather pace, Asia/Pacific banks will become more aggressive in gaining size through inorganic growth and will feel more confident in revisiting regionalization plans.

Michael Araneta, Senior Consulting and Research Manager at IDC Financial Insights Asia/Pacific, says, "The merger and consolidation trends that we expect in 2010 will transform the industry. For one, we will see increasing market share concentration among top-tier institutions. Large banks will get more dominant and have greater pricing advantage. To some extent, it will be difficult for niche banks to thrive."

The IDC Financial Insights report states that the growing dominance of large banks brings to the fore two issues that gained prominence in the recent crisis: too-big-to-fail and systemic risk. However, the report points out that the most concentrated markets in the Asia/Pacific region have remained healthy and have emerged relatively unscathed from the crisis. This supports the case for further size-building and further increases in market share concentration of top-tier banks.



In 2010, governments across the region are expected to play prominent roles in banking consolidation. The influence of the government is already seen through recently launched subsidies and tax incentives supporting industry consolidation, new guidelines governing mergers and acquisitions, as well as new financial sector master plans.

Araneta continues, "Thailand and Malaysia are coming up with new financial sector master plans soon, but other markets like Taiwan, Vietnam, and India are introducing salient changes to rules governing banking competition. These master plans aim to lift the efficiency and competitiveness of the industry typically by encouraging consolidation and by opening up the sector to a greater number of new or foreign players."

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