Malaysia's banking sector my further consolidate
Malaysia's banking sector my further consolidate
Agence France-Presse, Kuala Lumpur
Malaysia's banking sector may be heading for another round of
consolidation after a lull of three years and six banks are
potential takeover targets, JP Morgan said in a report.
Current conditions are becoming favorable for domestic mergers
and acquisitions among banks and some activity is expected within
the next six months, the firm said in research report released
this week.
JP Morgan said contributing factors to a possible
consolidation included the de-pegging of the ringgit and the
central bank's recent rejection of a major shareholder's
representative to have executive control over RHB Capital.
"We believe the conditions are becoming increasingly favorable
for in-market M and A activity to occur over the next six months
and we now ascribe a probability of 80 percent due to the recent
developments," it said.
JP Morgan said that RHB Capital, Southern Bank, EON Capital,
Hong Leong Bank, Affin Holdings and AmBank group were likely
targets.
"Excluding the three largest banking groups which would be the
natural acquirers, and Alliance Bank Bhd which (Singapore's)
Temasek Holdings Pte Ltd has bought a stake in, that would leave
the remaining six banks as potential acquire banks," it said.
"In our view, the likely bid would first come for a banking
group that has a strong consumer franchise, good management and a
healthy balance sheet. The three smaller banks that meet the
profile would be Southern Bank, EON Capital and Hong Leong Bank,"
it said.
Malaysia's top-three banks are Malayan Banking, Commerce-Asset
Holding and Public Bank.
JP Morgan said that maneuvering from Malaysia's state
investment arm Khazanah Nasional's to raise its bank stakes and
the lifting of capital controls could act as potential triggers
for merger talks among domestic banks.
"However, we believe the asking premiums and bidding prices
were still too far apart and a catalyst was required for this
valuation mismatch to narrow," it said.
A sweeping program three years ago merged Malaysia's 54 banks
and finance houses into 10 groups, and the central Bank Negara
wants a second wave of consolidation to leave between six and
eight banks ahead of full market liberalization in 2007.
The government has said that more mergers are crucial for
local banks to survive because foreign institutions in the
country are already doing more business despite operational
limitations.