Strike 2 in attempt to create Malaysia's largest Islamic bank

PETALING JAYA: A second attempt to create the country's biggest standalone Islamic bank has fallen through with the end of talks for a proposed merger of Malaysia Building Society Bhd (MBSB) and Bank Muamalat Malaysia Bhd.
Just a year ago, a planned three-way merger between CIMB Group Holdings Bhd, RHB Capital Bhd and Malaysia Building Society Bhd, which marked the country's first attempt to create Malaysia's first mega Islamic bank, also fell through.
MBSB's president and CEO Datuk Ahmad Zaini Othman said all parties worked diligently towards formulating a position that would best strengthen the new merged entity as well as serve the best interests of all shareholders, but they were still not able to commonly agree on that position.
MBSB and Bank Muamalat shareholders were first given the deadline of Dec 31, 2015 by Bank Negara Malaysia to conclude negotiations. However, on Dec 23, 2015, the parties submitted an application to Bank Negara for a month's extension, which was granted and which ended yesterday.
Despite the failed proposed merger, Ahmad Zaini said there is a lot of value in MBSB even though it is not a banking institution. "Hence, we should still continue to add to this value regardless of the status that MBSB holds."
He added: "Our team has already embarked on revised strategies in the fourth quarter of last year, taking cognizant of changes in the economy. We are also being more prudent in the sectors that we continue to lend and our impairment programme is running into its second year".
In addressing MBSB's plans moving forward, he placed the emphasis on the company's continuous efforts to strengthen its funding programme and build up its capabilities in both business and operations.
Shareholders of the two banks called off talks yesterday after they failed to reach an agreement at the end of four- month long discussions.
The news saw MBSB's share price fall 4 sen, or 2.76%, to RM1.41 yesterday with 831,800 shares traded. DRB-Hicom gained a 1 sen, 0.96%, to close at RM1.05 with 419,200 shares traded.
DRB-Hicom Bhd owns a 70% stake in Bank Muamalat, while Khazanah Nasional owns the remainder. It has been reported that DRB-Hicom needs to pare down its stake in Bank Muamalat to 40% by the end of this month.