Private Banking Sector Still Appears Intent on Consolidation
The credit crisis appears to have done little to dampen expectations of pending international consolidation across the private banking and wealth management industry,according to a new survey from KPMG. However, this appetite for acquisition belies some serious structural concerns that should be dealt with prior to many banks returning to the acquisition trail, the survey finds.
Perhaps most notably, the sector is facing a tremendous squeeze on its margins, driven by falling asset values and yields, and a high cost base.
“Many banks will find it hard to substantially improve their profit margins in the short-term. This, combined with some prospective acquirers adopting a ‘wait and see’ policy and potential sellers being reluctant to accept current low valuations, may delay any surge in M&A activity.”
The survey results are based on interviews with 100 senior executives in the private banking and wealth management industry, from 17 countries around the world.
Survey highlights:
- majority confident about growth prospects (though less so than in previous years)
- expectation of international consolidation
- small banks more focused on organic growth; seem unconcerned about consolidation
- lack of available acquisition targets, especially in Asia-Pacific
- domestic deals prevail at 54 percent of deals undertaken by survey respondents in the past two years
- China and India overwhelmingly cited the countries with greatest growth potential
- onshore/offshore banking mix may provide a catalyst for M&A.
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