Malaysia Today - Your Source of Independent News

A Malaysian bank to top South-East Asia?

Posted: 20 May 2011 10:11 AM PDT

By P Gunasegaram, Managing Editor,The Star

If the battle gets too hot, Maybank or CIMB may well end up paying way too much for RHB Capital. If that happens, that will sow the seeds for the failure of the acquisition because the costs will be too high to get payback anytime soon. And the ultimate loser will be, yes, the Government.

BIGGER is not necessarily better but there are some definite advantages to having heft. Better margins, for instance, and the ability to do deals, and to cut costs by downsizing after you have become big, all of which offer profit opportunities.

And then there is ego, the stature, standing and prestige which comes with being number one, even if it is only in terms of size. And often times it is ego too which will decide whether to do a takeover or not.

Which is why it makes sense for the capital markets and casual observers to believe that Malayan Banking Bhd and CIMB Group may be taking more than a cursory look at taking over RHB Capital, lock, stock and barrel.

There is a lot at stake. For both, it may well be the last opportunity to take over a relatively well-run and large bank in Malaysia, currently the fourth largest here. That provides opportunities to consolidate its number one position in terms of assets for Maybank and for CIMB to overtake Maybank and put itself firmly in number one place, both in terms of assets and market value.

Indeed, CIMB's climb has been so phenomenal in recent years that in recent months it has pipped Maybank a number of times as the most valuable listed company in Malaysia, although its assets are significantly smaller.

For both, the acquisition will put them in firm first place and probably beyond the reach of anyone else for some time to come unless there is an international merger that takes place, a considerably more complicated process.

For CIMB, RHB Capital will considerably enhance its presence in Singaporean consumer banking, something the group has to be quite desirous of. For both, subsequent branch rationalisation on acquisition and staff downsizing will offer considerable profit opportunities.

So one might be tempted to say, let the markets decide and the better bidder win. Which is fine normally but not when the Government has an interest in all three banks – Maybank through the national investment trust, Permodalan Nasional Bhd, CIMB through Khazanah Nasional and RHB Capital, whose largest shareholder with an over 40% stake is the pension fund, Employees Provident Fund or EPF.

Still, why can't there be a battle for RHB Capital anyway? If there is, RHB Cap shareholders – the major shareholders and minority shareholders – will be the likely winners as they get better prices.

That implies one thing – a vigilant Government won't let that happen especially since inflated egos can inflate prices too. It will likely pick which bank will get the opportunity to bid for RHB Capital. In other words, no bidding war.

But expect the cries of "foul!" to reverberate through the halls of the capital market and its players because whichever the Government chooses a foul move it will be.

Does that mean that the Government will stand by and wring its hands while it watches the bidding game and some of its money go up in smoke? Not necessarily so, there are other options. But it will take a bold decision.

Why not simply exchange shares based on current market value and everyone becomes shareholders of a much larger entity – the combined Maybank, CIMB Group and RHB Capital. It may not be the biggest bank in the world (recall Synergy Drive which resulted in Sime Darby becoming the world's largest plantation company?) but it will be the largest in South East Asia, just larger than Singapore's DBS in terms of assets and market value.

Why fight over RHB Capital when everyone can be one big happy family. If the Government concurs, it will happen as a matter of course. There will be cross-border regulatory issues as well but nothing that cannot be sorted out.

The problem is, who will head it? But that is a far smaller headache for the Government. We won't say who is our pick but answer this question: Who is one of the brightest, savviest bankers that Malaysia has ever seen? Who has overseen one of the most rapid expansions of a bank in Malaysia and guided its relatively painless entry into regionalisation?

But size has its dangers. Remember how our largest plantation company forgot its core businesses and got burnt by reckless ventures into areas it knew little about, areas it was able to get into because it was big enough to do so.

At a time when the world's largest banks were brought down to their knees and made to beg for dole from the US government which had to dish it out or see the financial system collapse, we simply must be circumspect about size and ensure that the checks and balances are put in place to stop excessive risk-taking.

The bigger they are, the harder they fall. So let's ensure they don't.

Oh yes, there's one more option: the Government can simply say let things remain the way they are. How unexciting!

Kredit: www.malaysia-today.net

Sabtu, 21 Mei 2011

Malaysia Today - Your Source of Independent News

Malaysia Today - Your Source of Independent News

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