Financial sector M&A deals lowest since 2002

LONDON (REUTERS) - Mergers and acquisitions in the financial sector are running at a more than decade low of US$133 billion (S$168 billion) so far this year, a sign of the scale of continuing nerves among banks and limits on their resources as regulators press them to build capital.

A flurry of telecoms and other deals announced in the second quarter results season this week have offered some relief for mergers and acquisitions (M&A) bankers in Europe, where takeovers across all sectors are down 41 per cent this year.

But potential buyers, such as private equity funds, have struggled to persuade European banks to shed non-strategic assets at knockdown prices even as they strive to bulk up capital and meet stricter international rules.

Thomson Reuters data showed overall financial sector M&A deals, which includes those by businesses such as banks, insurers and asset managers, this year are the slowest since 2002. Bank M&A has declined 58 per cent from 2012, while insurance M&A has inched up 4 per cent.

Even with this week's US$2.3 billion acquisition of commercial bank Capitalsource by banking holding company PacWest Bancorp, the year-to-date figure for the whole sector is 25 per cent below 2012.

Morgan Stanley is top of the investment banking league tables for advising on financial M&A this year.

Global fees for all M&A activity in the first half of the year were US$8.3 billion, down 16 per cent from a year ago, Thomson Reuters data showed earlier this week.