Fitch: Likely Positive Impact on RHB from Merger with Maybank or CIMB

Indonesia Finance

Friday, 03 June 2011 07:41

Theindonesiatoday.com - Fitch Ratings says RHB Bank's ratings ('BBB'/Stable) may benefit from a potential merger with either Malayan Banking Berhad (MBB; 'A-'/Stable) or CIMB Bank Berhad (CIMB; 'BBB+'/Stable), given the stronger credit profiles of both acquiring banks.

However, the agency believes that in the absence of a formal offer, it is still too early to judge the rating impact on RHB or on the acquiring banks. Bank Negara Malaysia (BNM) recently gave Maybank and CIMB its approval to commence negotiation for a potential merger.

Fitch notes that this possible merger - if it takes place - will reinforce not only the acquiring bank's domestic franchise but also its position as a regional player in Southeast Asia, currently dominated by the three SINGAPORE banks. At end-March 2011, total assets for Maybank were MYR380bn (USD126bn in equivalent), for CIMB MYR272bn (USD90bn) and for RHB Bank MYR133bn (USD44bn). However, a merger could result in a slight competitive disadvantage for the non-acquiring bank, whose balance sheet is likely to become smaller compared with that of the merged bank.

Because the unprecedented scale of such a merger may give rise to competitive bidding, Fitch highlights that important rating considerations include the offer price as well as the financing plans and structure, which will become clearer with time. The approval given by BNM to commence negotiation is valid for three months until end-August 2011.

Fitch further notes that such a merger may also result in the Malaysian banking system being concentrated in few large players. This may in turn result in more consolidation, especially for the smaller domestic banks to stay competitive. This development is in line with BNM's medium-term plan, which aims to strengthen Malaysian banks before the domestic banking sector becomes fully liberalised. (Theindonesiatoday.com)

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