M&A Quarterly Update & 2020 Key Themes APAC Financial Services

Q4 2019 Executive summary

There were 112 APAC FS related M&A deals in Q4 2019. Whilst Cross border intra Asia deals remain strong, driven by strategic this represents a 17% decrease on Q3 2019 deal count, spending investors looking to expand geographical reach and increase per deal has increased, driven by an increase in mega deals market share Although the number of deals decreased the deal value reached Whilst Japanese, Korean and MNC investors remain active investors $31.8bn, an increase of 12% on Q3 2019. This increase was mainly across APAC, South East Asian investors are becoming more active as the result of two mega deals, one in China, Hangfeng Bank ($14.2bn), they seek to expand outside of their domestic market: examples include and another in Japan, Aircastle Limited ($8.4bn). Bangkok Bank acquiring Bank Permata in Indonesia, whilst Bank Mandiri is looking to expand in Vietnam and the Philippines.

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Despite fintech deal count decreasing slightly this quarter, it remains a hot topic on the agenda of various countries. Regulatory liberalization and reform continues to drive deal flow and investment across APAC. Whilst the number of fintech deals dropped from 27 to 15 QoQ, fintech initiatives remain at the forefront of APACs M&A agenda - virtual Foreign ownership relaxation in the banking and sectors in banking remains a key priority for Korea, Singapore and Malaysia and China and Myanmar has led to new wholly foreign owned entities more recently the Philippines. There continues to be activity through being established. Drive for financial inclusion and development is cooperation or investment between financial institutions and seeing a continued push for virtual banks, most recently in Singapore technology companies, lead by both regulatory changes and drive for and the Philippines. Lastly, Japan and Indonesian regulators continue innovation and change. to encourage consolidation in their crowded regional markets.

M&A Quarterly Update & 2020 M&A Key Themes January 2020 PwC 2 APAC FS M&A Trends

112 FS M&A deals in Q4 with $31.8bn of spending... Mega deals from Japan and China drove deal spend… 1 2 Deal count v total size Deal count and total size by country QoQ, $’million and # of Q4-19, $'million and # of

$31,750m 46 20 16 12 3 1 6 4 1 1 6 $28,306m $24,298m $20,095m $16,653m $22,078m

156 148 $10,567m 127 132 $511m 112 $1,701m $3,125m $43m $33m $763m $64m $3m $21m

3 Q3 Q4 Q1 Q3Q2 Q3Q4 CHN AUS JPN KOR SGP THA Others VNM PPN MLY IDN FY18 FY18 FY19 FY19 FY19

Fintech and insurance sectors have softened slightly in Q4… Smaller deals remain…early signs of mega deals returning

Deal count by sub-sector Deal count by size of deal QoQ, # of QoQ, # of 156 156 148 148 Fintech 127 132 127 132 112 Undisclosed 112 Other4 $500m+ Insurance $100m-$500m Asset Management <$100m Banking

Q4 Q1 Q2 Q3 Q4 Q4 Q1 Q2 Q3 Q4 FY18 FY19 FY19 FY19 FY19 FY18 FY19 FY19 FY19 FY19

Notes: 1) Deal count and total size may vary from previous quarter’s PwC reporting due to additional deals attributed to previous quarters announced after reporting close; 2) Deal count and size by country may be larger than overall deal count and size due to multiple APAC bidders on single deals; 3) Other countries include Cambodia, Myanmar, Laos and Taiwan; 4) Other sectors predominantly include leasing and factoring M&A Quarterly Update & 2020 M&A Key Themes January 2020 PwC 3 M&A trends

APAC cross-border deals remain strong… Strategic investors continue to be the driving force behind deals… 5 Deal count by capital flow Distribution of strategic/ financial investment QoQ, # of QoQ, % of

158 157 Inbound6 129 134 Financial 30% 29% 28% 29% Outbound6 116 38% Intra-APAC

Strategic 70% 71% 72% 71% Domestic 62%

Q4 Q1 Q2 Q3 19-Q4 Q4 Q1 Q2 Q3 Q4 FY18 FY19 FY19 FY19 FY18 FY19 FY19 FY19 FY19

Notes: 5) Deal counts may vary from deal counts in data on page 3. Deals are classified by the target location however a small number of deals contain multiple bidders with capital flowing from both domestic, intra-APAC and/or APAC inbound markets. Hence, one deal may be classified up to 3 times for the purpose of this chart; 6) Inbound to and outbound from APAC countries` M&A Quarterly Update & 2020 M&A Key Themes January 2020 PwC 4 2020 APAC M&A key themes We expect a positive outlook for APAC M&A in 2020, driven by growing confidence and certainty in the market and favorable regulatory reforms encouraging more deal flow

Regulatory liberalization is changing the competitive landscape and driving deal flow 1 - Relaxation of foreign ownership laws and regulatory reforms in specific sectors in countries like China, Myanmar and Korea is leading to increased investment from foreign investors and creating new opportunities

MNCs are being forced by stakeholders to focus on their core businesses 2 - With increased pressure from shareholders to maximize returns, MNCs are revisiting how they allocate capital leading to potential divestments of their non-core APAC investments

Regulatory influence and market conditions are leading to consolidation in domestic markets 3 - To secure survival and avoid potential takeover, players in crowded markets like Indonesia and Japan are under increased pressure to acquire or merge, which is being supported by local regulators who want more consolidation

Increased investments into the frontier markets such as Myanmar and Cambodia 4 - Frontier markets, such as Myanmar, Cambodia and Central Asia which are seeing growing demand for financial services products, are becoming attractive for those looking for high growth investments or first mover advantage

Technology and digitalization will continue to disrupt the market 5 - FIs will increasingly adopt or invest in new technologies to deliver innovative experiences and enhance operational efficiencies, further financial inclusion and development seeing a continued push for virtual banks

M&A Quarterly Update & 2020 M&A Key Themes January 2019 PwC 5 APAC M&A trends

# of deals Size of deals QoQ change QoQ change Key trends

(2)20 $(102)m$511m • The Securities and Investments Commission and the Prudential Regulation Authority have published an updated -67%-5% -99%-46% Memorandum of Understanding in November, aiming to deepen cooperation on policy matters, improve information sharing and facilitate the implementation of the recommendations of the Royal Commission. Australia Deal outlook • UDC , an asset finance business, is being sold by Australia and New Zealand Banking Group. UDC is believed to have an equity value of USD 410 million, and the indicative offers were due in December 2019. L H • Consolidation in the wealth and asset management sector continues. Motor Trades Association of Australia Superannuation Fund and Tasplan finalised an agreement on 29 November 2019 to merge on 1 October 2020. The merger will create a national super fund with a combined scale of USD 15.9 billion in funds under management and 0 $264m 335,000 members. 0% +N/A% • A number of PE Funds are believed to be interested in acquiring AMP’s New Zealand wealth business, which is expected to sell for c.USD 400 million.

46 $22,078m • China has further opened up its financial sector by amending two regulations concerning financial institutions, which 21% 387% seeks to expand the business scope and ease market access for foreign-invested insurance companies and banks. The regulator has also announced that from 1 January 2020, restrictions on the stake of foreign investors in life China Deal outlook insurance JVs will be officially lifted, and the foreign shareholding can reach 100%. • We are seeing foreign investments into China starting to gain more momentum, particularly in the insurance and L H asset/wealth management sector, some announced actions in the last quarter include: 1) Chubb signs off 15.3% further stake purchase of Huatai, propelling them to a 46.2% holding in the Chinese insurer, 2) Allianz gains approval to commence operations of China’s first foreign wholly-owned insurance holding company, 3) JPMorgan received approval to set up a majority-owned securities venture in the country, and 4) BlackRock have agreed to form a wealth management JV with China Construction Bank and Temasek. • Whilst there are increasing excitement amongst foreign players to enter the burgeoning financial services market, thoughtful formulation of market entry or expansion strategy is needed, including securing strategic local partnerships, in order to compete with already established local players.

6 $3,125m • Indonesian banks continue to attract foreign interest with Bangkok Bank announcing that it has agreed to buy 500% 3,125% ~89.1% Bank Permata for $2.67bn, beating off interest from Japan’s Sumitomo Mitsui. Indonesia • Insurance companies have been active in FY19, seeking affinity partnerships with online platforms. Prudential have Deal outlook partnered with OVO, a leading payment platform, and AIA have followed Allianz and invested in the ride-hailing app Go-Jek. L H • Indonesia’s largest private lender, Bank Central Asia, announced the acquisition of Rabobank Indonesia for $28m. This continues the trend of Indonesian bank consolidation, which has been encouraged by the local regulator. • Following on from the elections in 2019, 2020 is expected to bring major reforms in the state-owned financial services sector, potentially starting with consolidation of state-owned entities into larger businesses.

M&A Quarterly Update & 2020 M&A Key Themes January 2020 PwC 6 APAC M&A trends

# of deals Size of deals QoQ change QoQ change Key trends

16 $10,567m • Japanese financial institutions are increasingly looking to North America and other South East Asian countries as a -20% 140% source of growth. Mizuho Leasing and Marubeni Corporation have agreed to acquire Aircastle Limited, a Stamford based aviation leasing company, and Tokio Century have announced the acquisition of Allegiant Partners for an Japan Deal outlook undisclosed amount. • Japanese life insurance and financial services groups are increasingly looking for global asset managers, in the L H search for higher returns and steady inflows of management fees. T&D Insurance Group have announced a business and capital alliance with Tikehau Capital, a French asset manager. • SBI Holdings has been active investing in Japanese regional banks, investing $23m in Shimane Bank and $10m in Fukushima Bank, in addition to rumours of further activity on the horizon. Japan’s regulator has encouraged consolidation of regional banks due to weak loan demand, high competition and negative interest rates decreasing profitability. .

12 $1,701m • As the regulator is promoting virtual banking through deregulation of the banking sector, various virtual banks are 50% 78% raising capital to gain size and acquire market share in the consumer finance sector. South Korea • With easing of regulations for foreign investments in Southeast Asia, Korean finance companies continue to expand Deal outlook into these markets. This said, with increasing competition for investment opportunities in Southeast Asia, Central Asia, namely Kazakhstan, has also attracted interest from Korean investors, However, investors are still cautious to L H these countries given the nascent environment for foreign investments. • Korean financial groups, namely Hana Financial Group and Shinhan Group, are expanding into non-banking areas to diversify their portfolios, such as the insurance and payment industry, to reduce their reliance in their traditional core businesses.

1 $21m • The Malaysian banking market has shown increasing signs of deal activity with BIMB Holdings, a Malaysian financial - -46% group, proposing to transfer its listing to its wholly-owned subsidiary Bank Islam Malaysia through a number of Malaysia transactions, including distribution-in-specie of BIMB's stakes in Bank Islam and 59.5%-owned insurance unit Deal outlook Syarikat Takaful Malaysia Keluarga to its shareholders. • Al Rajhi Bank Malaysia, a unit of a Saudi Arabian bank, is planning to merge with Malaysian Industrial Development L H Finance (MIDF), through a share swap deal for $408m. The two lenders have submitted their proposal to Bank Negara Malaysia which could see Permodalan Nasional (PNB), the Malaysian investment fund and the owner of MIDF, end up with 70% in the merged entity, with the remaining stake held by the Saudi Arabia-based bank. • Insurance giant AXA and Affin Bank are looking to sell their joint ventures AXA Affin General and AXA Affin Life for $500m and $150m respectively. Elsewhere in insurance, the proposed sale of a 94.7% stake in RHB Insurance, owned by Malaysia's RHB Bank, to Tokio Marine Asia has ended as they were unable to reach an agreement. We are expecting number for interests from foreign players to bid for these valuable insurance licenses.

M&A Quarterly Update & 2020 M&A Key Themes January 2020 PwC 7 APAC M&A trends

# of deals Size of deals QoQ change QoQ change Key trends

1 $(102)m$3m • Lenders are expecting double-digit growth in their assets and net income on the back of forecast economic growth -50% -99%-93% following a cut in the Reserve Requirement Ratio. • Following suit from other Asian markets, lawmakers in the Philippines have filed a bill offering a regulatory Philippines Deal outlook framework for virtual banking, looking to formalizing the development of the sector, increase financial inclusion and promote the development of financial technology. It is expected that a wide set of players including local L H conglomerates, foreign FIs and technology companies will explore these new opportunities in earnest. • The country is accelerating the adoption of digital payments. In November, BSP launched an online payment facility eGov Pay for government transactions and is championing the adoption of a national QR code standard. Multiple strategic partners are being formed among fintech companies and banks such as Investree Radhika Jaya with EastWest Bank and Philippine Digital Asset Exchange with Union Bank of the Philippines. • After raising the minimum capital requirement for local insurers from PHP550m to the current level of PHP900m, the Philippines insurance regulator has given up its plan for further increases. However, the increase in capital requirements has already led several insurers to close down, including AFPGen and Meridian. Potential consolidation opportunities exist for those undercapitalized insurers.

3 $43m • 21 applications were submitted to bid for Singapore's first batch of virtual banking licenses, including two full -50% -66% licenses and three wholesale licenses. Financial services and non-financial services parties such as Razer, Ant Financials and Grab, has announced to form consortiums for the licenses. Singapore Deal outlook • Multinational corporations (“MNC”), notably global insurers, are revisiting their strategic positioning in Asia. This triggers some potential exits from the country and local players are evaluating such opportunities for acquisition to L H strengthen operations and further increase their market share. • Continuous flow of outbound deals driven by the investments into SEA, notably in the banking and asset management sector.

1 $33m • Bangkok Bank has made its first move of overseas expansion with its acquisition of Standard Chartered's -75% -99% Indonesian non-core subsidiary, Bank Permata, for US$2.7bn. Scotiabank, having sold 49% stake in Thanachart Bank, is expected to launch sale process of remaining stakes in Thanachart Bank's two subsidiaries in early 2020.7 Thailand Deal outlook • King Wai Group, a Hong Kong-based property developer with established presence in Thailand, has agreed to acquire Manulife’s Thailand insurance (a 99.61% stake) and asset management (a 48.86% stake) operations in L H Thailand for THB 1bn (USD 33m). The deal is expected to help the group expand its insurance offerings in the market, following its previous acquisition of QBE Insurance (Thailand) in 2018. • In the fintech space, Siam Commercial Bank is reported to spin off one of its fintech subsidiary, either Digital Ventures or National ITMX, with a valuation of at least USD 1bn, in the hope that the spinoff would enhance the unit’s ability to raise its own funds. In addition, Kasikornbank has set up a JV with Line Corporation to provide mobile financial services in Thailand, and planning to launch the services in mid 2020 through the Line App.

Notes: 7) Bangkok Bank – Bank Permata deal is included in Indonesia deal count and deal size. M&A Quarterly Update & 2020 M&A Key Themes January 2020 PwC 8 APAC M&A trends

# of deals Size of deals QoQ change QoQ change Key trends

4 $64m • Leading on from an active Q3, FWD completed the $400m acquisition of Vietcombank-Cardif Life Insurance whilst 100% -93% KB insurance are looking to acquire a 17% stake in Bao Minh Insurance. The insurance sector is expected to attract significant foreign capital, from countries such as Japan and Korea, in 2020 to keep up with the rapid growth in the Vietnam Deal outlook domestic market. • Hana Bank completed its 15%, $875m acquisition of BIDV and other banks, such as Military Commercial Bank, are L H continuing to seek strategic foreign investment within the 20% foreign ownership limit. Foreign ownership limits are not expected to change in the near future, however, the government may consider on a case-by-case basis to raise the limit to help banks reach capital adequacy requirements. • Q4 was an active quarter in the non-banking consumer finance market, South Korea’s Hyundai Card is to acquire a 50% stake in FCCOM for $42m whilst other players are actively searching for additional capital.

6 $763m • Following the granting of provisional insurance licenses earlier in 2019, Myanmar’s government issued full licenses Others10 100% 10,800% to five foreign wholly owned life insurers and six other foreign insurance JVs to commence operations. • The Central Bank of Myanmar (“CBM”) are inviting applications for two types of foreign bank licenses to be issued - Other Deal outlook branch or subsidiary license. Successful applicants of a branch license, together with the 13 existing foreign bank APAC branches, will be allowed to conduct onshore wholesale banking business. The new foreign bank subsidiary licenses countries L H are permitted to conduct wholesale banking and also retail banking activities beginning from 1 January 2021, they will be allowed to establish up to 10 branches or off-site ATMs with a minimum paid up capital of USD100 million. Meanwhile, foreign banks can hold up to 35% of the ownership in domestic private banks from 1 Jan 2020. • Banking and micro financing sector in the frontier market continues to gain traction in the last quarter, particularly from the Japanese investors. SBI Holdings has agreed to acquire 70% stake in Ly Hour Microfinance via new share placement, and Daiwa Securities Group will form a local JV with OK Myanmar, a local supplier of commercial coolers to the food industry, in the small loan business. National Bank of Canada also announced an additional investment into Cambodia-based ABA Bank, transforming it into its wholly owned subsidiary. Kookmin Bank, a subsidiary of Korean KB Financial Group, has agreed to acquire a 70% stake in PRASAC, a Cambodia-based microfinance company.

M&A Quarterly Update & 2020 M&A Key Themes January 2020 PwC 9 Data compilation methodology and disclaimer

Source • The data presented is based on information compiled by Mergermarket and PwC analysis unless stated otherwise

Deal • Announced deals were used in the analysis. Some announced deals might not go on to complete announcement

• The deal volume figures presented in this report refer to the number of deals announced, whether or not a value is disclosed for Deal volume the deal

• The deal value figures presented in this report refer only to those deals where a value has been disclosed, and the value is Deal value based on the historical consideration in $.

• Inbound acquisitions are defined as a non-APAC bidder acquiring an APAC target. • Intra-Asia acquisitions are defined as an APAC bidder acquiring an APAC target that is not a domestic acquisition. Regions • Outbound acquisitions are defined as an APAC bidder acquiring a non-APAC target. • Domestic acquisitions are defined as an APAC bidder acquiring a target in the same country as the bidder.

• FS Sectors includes Banking, Fund Management, Insurance related, , Principal finance, rental and leasing, Sectors securities and commodities brokers and /Private Equity, in which the dominant sector related to the deal are presented, namely Asset Management, Banking, Insurance or Others.

• Geography on a transaction is defined by the dominant geography of the Target or Bidder. The dominant geography is the Geography location of the headquarters of the underlying company. Either the Target or Bidder in APAC is counted inside the presentation.

M&A Quarterly Update & 2020 M&A Key Themes January 2020 PwC 10 Contacts

Authors Country contacts

Matthew Phillips Iain Tan Chris ST Chan Asia FS M&A Leader & China FS Lead Partner - Australia China / HK FS M&A Leader E: [email protected] E: [email protected] E: [email protected]

Eric Darmawan Masaya Kato Thomas Crasti FS Deals Partner - Indonesia Japan Deals Lead China FS Deals E: [email protected] E: [email protected] E: [email protected] Joo-Cheol Lee Chi Win Liew Korea FS Deals Malaysia Deals Lead Joseph Lo E: [email protected] E: [email protected] China FS Deals Kok Weng Sam E: [email protected] Mary Jade T. Roxas Deals Leader Philippines FS Deals Leader - Singapore E: [email protected] E: [email protected] Syd Ho China FS Deals Phuwin Norchoovech Nguyen Luong Hien E: [email protected] Thailand Deals Lead Vietnam Deals Lead E: [email protected] E: [email protected]

Jacky Shen Janeshwar Teja Pachigolla China FS Deals Myanmar Deals Lead E: [email protected] E: [email protected]

M&A Quarterly Update & 2020 M&A Key Themes January 2020 PwC 11 Thank you

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