KUALA LUMPUR: CIMB Group
Holdings , Malaysia's second-largest bank by assets which is attempting to seal a game-changing merger with domestic rivals, said it expects the three banks involved to finalise the structure of the merged entity by early 2015.
CIMB has floated a merger with smaller local rivals RHB Capital Bhd and a combination of both their Islamic banking operations with Malaysia Building Society Bhd in a deal that will make the merged entity the biggest in Malaysia by assets, leap-frogging Malayan Banking Bhd.
"All three parties are presently in deep discussions and are in the midst of a due diligence process," Zafrul Aziz, CIMB's acting group chief executive, said in a statement. "We expect to come to an agreement by early first quarter of 2015."
But the fate of the proposal now hinges on key shareholder Aabar Investments. Abu Dhabi based Aabar, which owns 21 percent of RHB, holds the trump card after the Employees Provident Fund (EPF) was barred in October from voting due to the state pension funds' large shareholding in the three banks. And Aabar wants a higher price for its stake.
No voting date for the merger proposal has been set as the EPF has appealed against the decision to bar it.
CIMB, which is also Southeast Asia's fifth-largest bank by assets, announced a 16 percent fall in third-quarter net profit, mainly dragged by higher loan impairments at its Indonesia operations.
Net profit for the July-September period dropped to 890 million ringgit ($265.35 million) from 1.06 billion ringgit for the same quarter a year earlier, it said in a statement. Revenue was marginally higher year-on-year at 3.53 billion ringgit.
The results mark CIMB's sixth straight quarter of year-on-year profit drop, also hurt by slower loan growth and fewer large IPOs during the period. Malayan Banking (Maybank) is due to release its results on Nov. 27.
"CIMB Niaga (CIMB's Indonesian operations) is expected to continue to be challenged by asset quality and tight liquidity in the Indonesian banking system in the near term," said Zafrul. (1 US dollar = 3.3540 Malaysian ringgit) - Reuters
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