HONG KONG — As global banks slim down to satisfy regulators, a new wave of Asian buyers keen to be players on the regional stage is stepping up.
Roughly $96 billion in assets ranging from entire businesses to portfolios of loans, have been put up for sale, a banker who has been pitched the deals in Asia said. The sellers are mainly European banks that are under orders to shrink their balance sheets but feeling pressure to hold onto assets in their home markets, even as they see potential for faster growth elsewhere.
Potential buyers are pressing for low prices, knowing the sellers are under pressure and aware that the value of some financial operations has proved to be fleeting.
Among the deals in the works: Dutch ING Groep NV's (ING) auction of its Asia insurance arm, which has attracted interest from Hong Kong-based insurer AIA Group Ltd. (AAGIY) and Korea Life Insurance, among others; HSBC Holdings PLC's (HBC) talks to sell its South Korean retail operation to Korea's KDB Financial Group; and U.S. brokerage Piper Jaffray Cos.'s (PJC) possible sale of its Hong Kong unit, which has roused interest from Chinese brokers, people familiar with the deals have said. French banks also are disgorging at a discount portfolios of loans together work billion of euros.
This smorgasbord of financial assets has opened a window for aspiring local players ranging from Malaysia's CIMB Group Holdings Bhd to Thailand's Bank of Ayudhya PCL to Japan's Sumitomo Mitsui Financial Group Inc. (SMFG). "The future was always going to be about the rise of many regional players; there is such a thing as being too big to manage," said CIMB Chief Executive Nazir Razak, who aspires to build a pan-regional bank.
SMFG recently paid $7.2 billion for Royal Bank of Scotland Group PLC's (RBS) aviation-leasing business; people familiar with the situation said the talks dragged out as the Japanese megabank meticulously went through the business and negotiated hard. The Japanese bank's president, Koichi Miyata, said in January that his bank had been offered assets and businesses worth $96 billion from European financial firms since last April.
Distressed sellers mean prices are falling, bankers say. There were a record 996 transactions in the financial sector in 2011 across Asia, according to Dealogic, but in a rough guide to pricing, the total dollar value fell 15% from 2010.
Western banks are caught between the desire for growth in Asia and pressure at home. Banking revenue has grown at an annual average rate of 9% over the past three years in Asia, at a time when revenue has been flat or shrinking in Western markets, according to consultants Oliver Wyman.
"Asia remains core to many European banks' strategies, but it is starting to become socially acceptable to consider select divestments to improve their overall financial position," said Willard McLane, head of Morgan Stanley's financial institutions group in the Asia-Pacific.
Many executives at foreign firms in the region spent a large part of their careers building up their businesses since the Asian financial crisis hit 15 years ago, only to now see parts sold at bargain levels.
"The reverse of 1997 is happening: Asian banks and insurers are looking to use their high trading multiples to buy assets that are owned by western institutions in Asia," said Charles-Everard de T'Serclaes, head of JPMorgan Chase's financial institutions group for South East Asia. "Some Southeast Asian financial institutions are rounding out regional platforms; Japanese insurers are gaining momentum overseas and the Chinese haven't really started yet."
HSBC, which is selling or closing businesses in some markets, has reached several deals, including the sale of its Thai retail and wealth-management business to Bank of Ayudhya. Mitsui Sumitomo Insurance Co., Japan's second-largest life insurer by premiums, bought a 50% stake in the life-insurance unit of Indonesian conglomerate Sinar Mas Group for US$815 million.
Another bank that is expanding is Malaysia's CIMB, which is in exclusive talks to buy RBS's Asia equities franchise. Led by the 45-year-old Mr. Razak, CIMB has expanded via a series of small acquisitions from an investment boutique to a full-service Southeast Asian bank. The son of former Malaysian Prime Minister Abdul Razak and younger brother of current premier Najib Razak, Mr. Razak has helped the government deliver on plans to make Malaysia a regional financial-services hub.
CIMB aims to acquire the RBS business cheaply and then cut costs, including giving many of the RBS bankers who stay on significant pay cuts, people familiar with the matter said.
"The easy part is the price: the difficult part is to make sure you integrate and realizing value to justify the price," Mr. Razak said in an interview.
