Banking sector and capital markets will dominate mergers and acquisitions in the financial service area in 2015, with over half (52pct) of CEOs intending to conduct acquisitions in the next 12 months, compared to only 29pct in 2014, according to the 12th edition of the EY survey – Financial Services Confidence Barometer.
‘The level of activity in the banking sector and on capital markets exceeds the growth recorded by the financial services area as a whole – where 46pct of CEOs expect to make acquisitions over the next 12 months. The outlook over the global economy represents one of the reasons of increasing the interest in mergers and acquisitions; 80pct of bank executives are optimistic, compared to 70pct six months ago,’ EY informs.
Also, the barometer shows, 78pct of these have voiced confidence in corporate earnings.
‘The compressed interest rate margins and the pressures put by regulations on capital may lead to further consolidation in industry and to sales of assets, while the need to keep up with the pace of innovation accelerates acquisitions. After we witnessed a revival of the M&A [mergers and acquisitions] activity in 2014, we expect this trend to continue to manifest strongly on the market also in 2015,’ said Florin Vasilica, head of EY Romania’s Transactions Assistance Department.
According to the barometer, 65pct of bank CEOs said they would focus their M&A strategies on cross-border transactions in neighbouring regions, compared to 15pct who will focus on domestic transactions and 20pct that will focus on global transactions. Great Britain, India, Germany, Russia and South Africa are the main investment destinations for the banking sector in 2015.
In a context where banks have to use new the new technologies to remain competitive, 59pct of the M&A activity will be oriented to innovative investments, which could lead to changes to the entire business model, such as expanding into another industry. On the whole of the financial services area, 65% of M&A activity will target various forms of innovative investments.
In turn, the EY shows, the CEOs in the insurance sector tend towards a global approach this year, with 61pct of them focusing their M&A strategy on international transactions this year, compared to 27pct at the level of all sectors of financial services.
‘Some 39pct of insurers intend to make acquisitions in the next 12 months either domestically or in the immediate region, or globally. The current economic milieu makes acquisitions become an attractive option,’ explains the quoted document.
EY’s Financial Services Confidence Barometer is a biannual survey that probes the views of over 1,600 executives from large companies worldwide and from various industries. As many as 154 of the CEOs interviewed work in sectors such as banking, capital markets, insurance and management of goods and assets.