Mega bank merger remains on the table

PETALING JAYA: CIMB Group Holdings Bhd, RHB Capital Bhd (RHBCap) and Malaysia Building Society Bhd (MBSB) have come out to clarify that they are still in discussions on the proposed mega bank merger.
The clarification came in response to a query by Bursa Malaysia following news reports that the merger would be aborted.
“On behalf of RHB Capital Bhd, RHB Investment Bank Bhd wishes to clarify that the company is unable to provide further details pertaining to the current status of the said mega bank merger as the parties to the proposed merger are still in discussions,” RHBCap told Bursa Malaysia yesterday.
Both CIMB Group and MBSB said they will hold their respective board meetings today to discuss the merger.
“The board of directors of CIMB Group will be meeting on Wednesday to discuss the proposed merger. Should there be any material development on the proposed merger which warrants disclosure, the appropriate announcement will be made on Bursa Securities accordingly.”
MBSB said today’s board meeting was rescheduled from last week. “Among the items for deliberation are matters relating to the proposed merger.”
Earlier, an analyst told SunBiz that calling off the proposed mega merger would make sense as proceeding with it would actually do more harm than good for all parties.
The analyst said this was evident at the very beginning when the proposed merger was announced in that share prices of the banking groups fell, reflecting investor sentiment towards it.
“It seems that the market thinks that if they don’t go through with it, judging by the rebound in both CIMB and RHBCap’s share prices, it will be good for them.
“Before that, they were concerned with whether they could achieve the estimated synergy of RM1.2 billion a year and maybe that was the reason why it dragged on the share prices of both for six months since the merger was announced last year,” the analyst told SunBiz yesterday.
The analyst said the synergy is difficult to achieve with the challenging economic conditions so it would make sense not to go ahead with it.
On the potential impact if the merger is indeed cancelled, the analyst said CIMB, RHBCap and MBSB are still separate entities, thus there will be no impact on their operations.
Another analyst said it will be business as usual for them, especially for CIMB and RHB, and they will continue on their growth path. But the major loser will be MBSB.
“The one that could be left behind is MBSB, whose growth has been limited by the amount of capital it has. Merging with the Islamic banks of the other two entities would make it bigger, strengthen its capital and take it to the next level.”
The analyst added that the entities would not necessarily lose out on the intended synergies.
“On their own, they already have their own cost initiatives and how to streamline certain costs. One plus one does not necessarily make you a bigger entity. The savings (synergies) of RM1 billion would have come about if they rationalised and consolidated people. But even if this merger doesn’t happen, the growth will continue as it is.”
CIMB was the top gainer and the 11th most active stock yesterday It closed at RM5.92, up 14.29% or 74 sen, with 29.22 million shares changing hands.
RHBCap closed 0.91% or 7 sen higher at RM7.80 on 6.45 million shares traded.
MBSB was the top five worst-performing stock and the sixth most active counter yesterday. It closed at RM2.06, 5.94% or 13 sen lower, with 34.23 million shares traded.