Historically, we have witnessed banks acquiring other banks for the below specified reasons to achieve their individual objectives:

  1. Cost Benefits: Economies of Scale, Efficiency, Lower cost of funding, risk diversification
  2. Revenue Benefits: Economies and scope for enhanced revenue from a larger customer base
  3. Economic conditions: Higher resistance to up and down swings in business cycles
  4. Other: Higher valuation, managerial benefits, pre-empting possible takeover

Key Takeaways

  • Historical trends saw banks acquiring for cost and revenue benefits; recent shifts focus on specialized firms for customer retention amid a hyper-competitive fintech landscape.
  • Post-pandemic, global banks increased acquisitions in specialized firms by over 50%, driven by the need for inorganic fintech expansion and cost savings in customer acquisition.
  • Future banking mergers will be driven by cybersecurity, digital acceleration (fintech, blockchain), financial inclusion, and a rising focus on ESG; MENA region expected to align with these trends supported by regulatory impetus

In our view, in addition to the conventional drivers of M&A and investment activity in the banking and financial services such as cost and revenue synergies, higher asset base etc., the future M&A and investment in the banking & FS space would be fueled by the need to adapt to ever evolving latest technological advancements aimed not only at enhancing customer experience but also to retain current customer base.

Karthik Jagadeesan
Associate Director, Advisory
KPMG in Qatar

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Thriving in the Digital Era

Qatar Banking Perspectives - 2023

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