The Hindu : Business : India among most preferred private banking destinations

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Saturday, Jul 15, 2006

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India among most preferred private banking destinations — KPMG report

Staff Correspondent

Global M&A activity in the industry is booming

MUMBAI: India is one of the most preferred private banking destinations as its economy is not only growing at 8 per cent annually, but is also going through a transformation to the next level of maturity. This enables double digit returns on most asset classes which is not the case in a majority of countries, according to Abizer Diwanji, Head, Transaction Services, KPMG India.

The research released by KPMG International in its third in the annual series `Hungry for more - Acquisition appetite and strategy in the global private banking and wealth management industry,' points out that M&A activity in the global private banking and wealth management industry is booming with 258 deals completed in 2005, up 80 per cent over the previous year, which is a record. The survey was conducted by the Economist Intelligence Unit.

Offering a perspective on the private banking scenario in India, Mr. Diwanji said, ``robust and liquid financial markets enable exits on a timely basis to be able to realise gains. This makes India a good resource deployment avenue. In addition, an emerging trend in India is a high savings rate given increased earning levels. This has resulted in a robust private banking capital raising avenue. Indian private banking capital will soon fund deployments to a significant part of our capital needs.''

The research also points out that globally, this level of activity is likely to persist as it also found that over 90 per cent of private banks believe that there are good growth prospects for the industry over the next three years and 89 per cent are either actively seeking acquisition targets or would consider acquiring if the right opportunity arose.

According to Stuart Robertson, Head, Financial Advisory Services, KPMG, Switzerland, "the explosion of corporate activity in private banking is the result of a perfect storm of contributing factors. There has been an explosion of personal wealth, particularly in Asia, continuing growth in private banking revenues and regulatory pressures benefiting economies of scale. Private banks have tended to react in two ways. The favourable market has allowed plenty to grow organically, but nearly a third of private banks reported acquisitions over the past three years. These acquiring banks have not rested on their laurels, they tend to be serial dealmakers, completing on average almost a deal every year. The high levels of activity will only increase if the seventy percent of non-acquisitive banks join the M&A market.''

The report says that the growth of personal wealth in Asian economies is providing the greatest impetus to M&A activity. Forty five per cent of all deals last year took place in the Asia-Pacific region and respondents nominated China followed by India as countries where they were seeking to expand.

Although Asia is the hottest region, little international money is flowing into the region, according to Mr. Robertson. Most players already have a footprint in the region and virtually all the activity comprises regional or domestic deals in an attempt to increase market share and economies of scale.

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