BANKING NEWS
South African
News
Decline in
banking
M&A: a fundamental shift
[SA NEWS] Recent years’ decline in banking Mergers and Acquisitions (M&A) is
not simply due to a cyclical downturn but represents changes in the regulatory
and economic environment, according to research from PwC.
RECENT POLITICAL AND ECONOMIC uncertainty is making it
difficult to agree on valuations, predict future impairments, arrange
funding and gain shareholder approval. The market instability is
also having an effect on deal confidence, and therefore frustrating
M&A activity.
‘The picture is less gloomy in South Africa than in Europe and
the US, but some financial institutions still have some significant
restructuring ahead of them,’ says Tom Winterboer, PwC Financial
Services Leader for Africa and Southern Africa. ‘Africa has the
potential to generate increasing volumes of banking M&A over the
next few years.
‘South African banks are among those looking to other African
markets for future growth, and the country remains the leading
gateway into Africa for foreign entrants. Most major African
domestic banks have international strategic or equity partners,
but there is still potential for inbound M&A.’
Winterboer says that South Africa’s major banks’ earnings
growth and returns on equity compare favourably with those of
its global peers.
PwC’s report “Brave new world: New frontiers in banking M&A”
identified a range of factors driving a change in the financial
sector. These include fiscal pressures, regulatory reform, customer
behaviour, and the shortage of skills, economic shifts and the future
of M&A activity in the sector.
Simon Venables, PwC Head of Deals for Africa, says: ‘The total
number and value of global banking M&A transactions has declined
steadily over the past few years. Banking deals have consistently
accounted for the majority of financial services M&A over the past
decade. The decline in M&A over the past three years – or excluding
government-led deals, over the past five years – is not just a cyclical
downturn; there are permanent changes taking p