M&A activity in Thailand’s financial services is set for a rebound in 2024

M&A activity in Thailand’s financial services is set
for a rebound in 2024

Potential reduction in interest rates, issuance of virtual banks licences, debt restructuring and digitalisation support recovery
 

BANGKOK, 3 April 2024 – PwC Thailand predicts a resurgence in mergers and acquisitions (M&A) within the country’s financial services sector in 2024, following a sluggish year.

Factors such as issuance of virtual bank licences, debt restructuring, and digital capability enhancement are expected to support a recovery of M&A activities. Financial institutions will need to reassess their deal objectives, evaluate costs, and ensure that deals align with their business strategy, it said.

Phuwin said.

he said.

On 7 February, Thailand’s central bank left its key interest rate unchanged at 2.5% but analysts said the BOT could start cutting rates as early as the second half of this year.

Global M&A in the financial services industry is expected to increase in the volume and value in 2024 compared to last year, according to PwC’s Global M&A Trends in Financial Services: 2024 Outlook. In 2023, global M&A volumes and values in financial services declined by 12% and 40%.

However, recent positive signs, including actions taken by central banks worldwide and an uptick in M&A activity in the financial markets, indicate a recovery from a period of uncertainty driven by economic factors such as inflation and interest rates, the report said.

The Thai financial services industry is expected to be a hotspot for deals activities this year, particularly in the banking sector, Phuwin said.

This anticipation comes as the BOT plans to issue unlimited licences for branchless commercial banks, also known as virtual banks. There will be new players in the banking landscape, focusing on the unserved and underserved segments. Some incumbent commercial banks may want to grow and protect by forming strategic alliances with non-bank partners such as technology, telecommunication or retail businesses, and increase investments in digital banking capabilities, he said.

Following the turmoil in the debenture market, banks will be busy helping their customers in various financial solutions, such as debt restructuring and other fund raising activities. Other M&A activities such as divestment may also arise from financial distressed situations. 

In the insurance sector, M&A activity is expected in the non-life insurance business, Phuwin said.

Phuwin said.

Newcomers to the industry, particularly businesses with substantial customer bases like payment service providers, retailers, and other non-banks, may seek to expand downstream by acquiring insurance businesses, he said. 

Digital transformation continues to be a strategic priority, particularly for banks and insurance companies where technology is an integral part of business operations. 

Banks and insurers must actively seek partners to support ecosystem expansion, provide stable technology, and reduce costs with improved customer experience. On the other hand, fintech companies will require business partners such as banks and insurers who can provide capital for ecosystem development and the establishment of a viable business model.

Phuwin said, “While waiting to assess the direction of financial costs, businesses have an opportunity to reconsider the purpose of their deals. Is it for portfolio expansion, ecosystem growth, or acquiring new capabilities? Once the purpose is identified, it is crucial to evaluate whether the goals are worth the costs associated with completing the deal.

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