The CIMB banking group will emerge as Malaysia's first universal banking entity with its investment banking business being integrated with that of Commerce Asset-Holding Bhd's (CAHB) commercial banking arm, Bumiputra-Commerce Bank Bhd (BCB).
Under the RM5.3bil deal, CIMB's investment banking business will be taken private and its shareholders given an option to either receive RM5.50 a share in cash or new CAHB shares valued at RM4.80 each.
The transformation will also result in Datuk Nazir Razak, the younger brother of Deputy Prime Minister Datuk Seri Najib Abdul Razak, becoming the supremo of the new banking group that will oversee the commercial and investment banking operations. Nazir is currently the managing director/chief executive of CIMB Bhd, Malaysia’s largest investment bank.
The new bank will have assets worth RM98bil. The country's largest bank, Maybank, has assets of RM179bil.
“The plan is in line with global trends to consolidate investment and commercial banks,'' CIMB said in a statement.
The integration will create a financially stronger bank, help minimise duplication of resources and enable CAHB – the country's second largest lender – to cross sell its products and services as it prepares for local and regional acquisitions.
The Government is encouraging local banks to expand overseas, boost returns and strengthen capacities and capabilities to prepare for the liberalisation of the banking sector by 2007.
Nazir said: “In order to compete with global players, we must maximise synergies, starting with a higher valued balance sheet and a wider range of product offerings, as well as optimise economies of scale by sharing distribution and reducing duplication of work.''
The banking group is seeking acquisitions to further expand overseas. CIMB, already the largest investment bank in South-East Asia, is finalising a deal to acquire the stockbroking business of Singapore's GK Goh Holdings Ltd.
CAHB, in turn, has a stake in Indonesia's PT Bank Niaga, while BCB has branches in Hong Kong, Singapore, Tokyo, London and Yangon.
The move by CIMB and Commerce to integrate their commercial and investment banking activities will certainly put pressure on other Malaysian banks such as Maybank to speed up their expansion overseas, this despite the fact that Maybank currently operates in 12 countries through its network of branch subsidiaries, associates and representative offices.
“The group will be primed to capitalise on potential opportunities,” Nazir said.
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