Bank Negara is believed not likely to approve the entry of a private equity firm into RHB Capital Bhd, the fourth largest banking group, following the troubled history of Hong-Kong based Primus Pacific Partners at EON Bank.
“There is no synergy between private equity and banks,” said a source.
Reuters reported last week that the Carlyle group and TPG Capital were making a joint-bid for a US$1.5bil stake in RHB Capital.
Primus is currently embroiled in a court battle in which Ng Wing Fai of Primus, which owns 20.2% of EON Capital Bhd, is challenging the other directors on their decision to table the takeover bid (which Primus considers undervalued) from Hong Leong Bank to shareholders.
The court judgement will be made known by the end of this month.
EON Capital has been rocked by a series of disgreements among shareholders with Ng and Rin Kei Mei ending on opposing sides and issues with Bank Negara such as non-subscription of bonds by Primus.
Abu Dhabi Commercial Bank (ADCB), the 25% investor in RHB Capital, has engaged Goldman Sachs and Bank of America-Merrill Lynch to run the action for the sale of its stake.
TPG has an Indonesian arm, TP Nusantara which currently owns 59.7% of Bank Tabungan Pensiun Nasional; TPG plays an active role in the management of the bank which has done well since the purchase in 2008, said HwangDBS Vickers Research senior analyst Lim Sue Lin.
“If that is true, TPG may like RHB for its value and sustainable business model,” she said, noting that over the last three to four years, the banking group had been able to grow on its own with a proven business model.
Analysts will not discount the possibility that CIMB may be interested in the stake in RHB although they see duplication within the two banking groups.
“Any consolidation will be more for size,” said a senior analyst, adding that a merger between CIMB and RHB would create the fourth largest bank in Asean by assets.
However, analysts caution that there could be another round of voluntary separation scheme (VSS) should CIMB merge with RHB.
CIMB has voiced its ambition of being among the top three banks in South-East Asia by market capitalisation, positions currently held by Singapore banks DBS, OCBC and UOB.
“If it happens, the benefits are likely at the consumer banking level,” said another senior analyst, adding that RHB has higher retail deposits and CIMB will be able to leverage on the “Easy” banking concept based on lower costs, speed of approval and convenience.
RHB has hired 500 new staff for its 150 Easy outlets, targeted to reach 270 by year-end.
Some analysts recall that Maybank was said to be keen on RHB a few years back but are unsure of its interest now,
However, one analyst opined that Maybank might need more time to digest its expensive acquisition of Bank Internasional Indonesia which has yet to contribute strongly to group results.
Analysts are keenly watching for developments in the reported interests of DBS owned by Singapore’s Temasek which, in turn, holds 14.8% of Alliance Financial Group (AFG) and Australia and New Zealand Banking Group (ANZ) which owns 24% of AMMB.
So far, foreign banks like ADCB and Bank of East Asia are holding 25% each in RHB Capital and Affin respectively while ANZ’s investment is up to 25% in AMMB.
While the limit on foreign shareholding in local banking groups is 30%, there has yet to be a precedent, an analyst observed.
“If ANZ were to acquire a stake in RHB, it would need to merge AMMB with RHB,” said Lim in a research note last Friday.
Noting that ANZ has expressed its interest to take a larger stake in AMMB, “even though the threshold for foreign shareholding remains capped at 30%, total returns as a shareholder would be larger for ANZ in an enlarged AMMB-RHB Capital scenario,” said Lim.
Should DBS buy the RHB stake, it is unclear if AFG will be merged with RHB or Temasek will sell off its stake in AFG, as investors can only hold one banking licence.
Hwang DBS said in its regional industry focus that Malaysian banks were currently preferred over those in Thailand and Indonesia, with excitement driven by mergers and acquisitions.
“The target banks will benefit from input the potential stakeholders could bring to the table to improve standalone value propositions,” said Lim in the report dated April 14.
According to Hwang DBS, the AMMB-ANZ alliance has proven to be the most successful foreign strategic shareholding tie-up to date.
It noted that the new management had implemented new risk management and risk scoring systems; made AMMB more flexible to adjust to interest rate hikes; improved its deposit franchise (particularly low cost deposits) and created additional sources of revenue flows from treasury and derivatives.
“These initiatives led AMMB’s net profit to grow from RM670mil in financial year (FY) 2008 (when ANZ became shareholder) to RM1.1bil in FY10,” the report said.
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