The proposed merger of RHB, CIMB, and MBSB may create a regional banking behemoth, but is this push for size well thought out enough, or is it possible that greater innovativeness could break more barriers?
September 08, 2014 | Julian NgCIMB was given the nod by Bank Negara Malaysia (BNM) to start exclusive negotiations for a merger with RHB and The Malaysia Building Society Bhd (MBSB) to form what has been dubbed in the country as a “mega merger”. If successful, the mega bank would not only surpass Maybank to become Malaysia’s largest but also have an asset size that would rival Singapore’s DBS and propel it to the league of the giants in Southeast Asia.
In what seemed like an official thumbs up that blurred lines between government and private enterprises, Malaysia’s prime minister Datuk Seri Najib Razak was quoted by the press as saying the proposed mega merger would create a behemoth that would rival HSBC in the global Sukuk market. This is treading on dangerous grounds not only because of the sheer vanity of the statement but its implications of tinkering with free markets as well as disconcerting moral hazards. It isn't necessarily size that matters in this case, it's what you do with policy. If the right policy was pursued, the Malaysian banking sector could emerge even stronger and possibly bigger.
Malaysia saw a phase of state-sponsored consolidation among banks in the early 2000s when over 50 morphed into 10. Murmurs of protests were heard through the grapevine about how pricing was unfair and how sales were forced when big banks given so-called “anchor status” were able to gobble up smaller banks on the cheap mainly through the muscle of policy. That the region was just fresh off the Asian financial crisis was an added help to the anchors from a valuations viewpoint. Fast-forward a decade and a half later, is this mega merger a kind of “consolidation part two” in achieving size just for the sake of it?
Current banking M&A policy possibly gets in the way of market pricing. Bank Negara Malaysia (BNM) for instance gave CIMB 90 days of exclusivity to talk with RHB and MBSB. BNM approval is also needed befo...
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Malaysia, Regulation, Risk and Regulation, SingaporeKeywords:RHB, MBSB, CIMB, M&A, Market Risk
