Banks eye Mexico, Middle East for M

LONDON, Mar 27 (Reuters) Banks are mulling acquisitions in Mexico, the Middle East, India, China and beyond to boost growth, but lofty valuations could thwart big deals, analysts at Morgan Stanley said after hosting a big bank conference.

Morgan Stanley, which last week hosted 70 chief executives and finance directors from banks and other financial firms, said there was a clear appetite for more deals.

''Given the weight of surplus capital among banks and investors wanting growth and the economies of scale you can get, there will be action,'' Huw van Steenis, analyst, said on Monday at a media briefing.

''It's obviously more tricky saying what the targets will be,'' he said, but added companies signalled that Brazil, Russia, India and China (BRIC) would remain key targets, added to by Mexico and the Middle East region.

''It was interesting how often Mexico and the Middle East came up,'' he said.

David Williams, co-head with van Steenis of banks and financials, said most banks indicated valuations were too high to make a big deal work, however, and even underperforming banks were producing high returns on equity.

''There are no dogs in the Fig (financial institutions group) arena,'' he said, adding that German banks, which had been poor performers, were closing the gap in terms of returns.

There was also concern banks could not guarantee the quality of businesses they were buying in emerging regions, Williams said, leaving the prospect of most deals being ''bolt-on acquisitions'' to enhance growth.

The analysts said this could include UBS buying smaller private banks in Europe or looking for onshore wealth management in Mexico.

They said executives at the conference were upbeat, signalling the year had started well, as economies are supportive and the credit environment remained benign.

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