RHB-AMMB to begin merger talks

PETALING JAYA: After more than a year of speculation, RHB Bank Bhd and AMMB Holdings Bhd are to begin talks for a merger.

Both banks will make an announcement about this today.

RHB and AMMB had requested for a suspension in the trading of their shares yesterday evening, “pending a material announcement”.

Sources said that the banks would announce that they had received the nod from Bank Negara to initiate merger talks.

If the deal materialises, then the merged entity would end up becoming the country’s fourth-largest bank by asset size.

According to banking sources, RHB is likely to be the acquiring bank, making an offer to the shareholders of AMMB that may involve cash and shares.

AMMB’s major owner is Australia and New Zealand Banking Group Ltd (ANZ) of Australia with a 23.78% stake, while its second-largest shareholder is founder Tan Sri Azman Hashim, who has an effective stake of 12.97%.

RHB, meanwhile, is 41%-owned by the Employees Provident Fund (EPF).

Both banks have a common shareholder in the EPF, with the pension fund also holding a 10.04% stake in AMMB, according to Bloomberg data.

The other substantial shareholders of RHB are Aabar Investments PJS with a 17.75% stake and OSK Holdings Bhd with 10.13%.

Based on the figures as at the end of last year, the combined assets of RHB-AMMB stood at RM368.3bil, trailing behind Public Bank Bhd’s RM389.73bil. RHB is currently the fourth-largest lender, while AMMB is the sixth largest based on asset size.

In terms of branch network, RHB has 278 branches, while AMMB’s totals 175 branches.

An analyst said while RHB and AMMB would make a good fit, both banks are operating in the same space that would see duplications that could likely cause potential layoffs.

AMMB had in the recent past been seen as a merger and acquisition candidate, considering that its major shareholder ANZ reportedly had a plan to exit from the banking group as part of a larger plan to exit from minority banking stakes in the region.

Last year, the Melbourne-based bank made a A$260mil (RM773.07mil) impairment loss on its stake in AMMB, which was read as a signal of its intention to dispose of its strategic stake. ANZ had bought into AMMB in 2006 in two tranches averaging RM3.63 a share or RM2.58bil, which translated into a price-to-book (P/B) ratio of 1.96 times.

According to banking sources, Azman may also be more open to selling, as he is retiring from almost all his positions within the banking group over the next two years.

The veteran banker is also said to have a say in who takes up the ANZ stake, as he has the first right of refusal to it.

Over at RHB, its previous banking deal was the proposed three-way merger deal involving itself, CIMB Group Holdings Bhd and Malaysia Building Society Bhd.

However, the deal was called off in January 2015 because RHB’s substantial shareholder Aabar had reportedly sought a high exit price.

AMMB closed up 11 sen to RM5.21 and is trading at a P/B value of 0.98 times. RHB was last done at RM5.39, which translated to a P/B of 0.97 times.

Meanwhile, earlier in the day, AMMB reported a 20% increase in earnings to RM335.81mil from RM280.02mil a year ago, boosted by higher net interest income for its fourth quarter ended March 31.

Its revenue came in at RM2.14bil compared with RM2.10bil a year ago. Earnings per share was at 11.17 sen compared with 9.32 sen previously.

The banking group has announced a dividend of 12.6 sen a share.