AMMB likely the next to jump on M&A bandwagon

PETALING JAYA: The mega bank merger between CIMB Group Holdings Bhd, RHB Capital Bhd and Malaysian Building Society Bhd has got tongues wagging that the local banking scene could see more merger possibilities.

The latest, or most likely to hop onto the potential merger and acquisition (M&A) bandwagon, is AMMB Holdings Bhd, following news that its major shareholders Australia and New Zealand Banking Group Ltd (ANZ) and Tan Sri Azman Hashim are considering selling their stakes in the bank.

ANZ has a 24% stake in AMMB while Azman indirectly holds 16%.

ANZ could be under pressure to have a tier-1 capital ratio of at least 8%, as required of the big four Australian banks, by the Australian regulators.

CIMB Research analyst Winson Ng said ANZ was targeting for a 8.5% tier-1 capital ratio by end-2014, despite the 15-basis point decline to 8.33% in the first quarter of 2014.

He said a non-Malaysian bank entity was the most likely buyer for ANZ’s stake, as there was no strong strategic rationale for banking mergers in Malaysia, unless required by the central bank.

“So far, we have not seen any evidence of the central bank exerting such pressure but we cannot discount the possibility of this materialising in the future,” Ng said.

For this reason, he believed AMMB was the most likely target for a takeover exercise.

If Bank Negara did require the banks to merge, he said Malayan Banking Bhd (Maybank) would acquire AMMB as it would solidify its position as the biggest bank in Malaysia with an asset size of RM709bil.

“Maybank is also keen to expand its auto loan book and be the largest player in this segment. If it takes over AMMB, its auto loan book would rise to RM53.5bil.

“The deal would also boost Maybank’s insurance business following AMMB’s acquisition of Kurnia Insurans in 2012,” he said.

However, he added that purchasing AMMB would tighten Maybank’s liquidity position as the former’s loan-to-deposit ratio (LDR) stood at 98.5% at end-June 2014, the highest in the sector, adding that there were also significant overlaps in the investment banking business.

Meanwhile, Ng said there was low likelihood of a merger between Public Bank Bhd and AMMB, given Public Bank’s focus on organic growth rather than via acquisition.

However, Hong Leong Bank Bhd could be “keener” on M&A, but AMMB’s high exposure to auto financing would be a “major turn-off” for HLB as it was restrictive in its lending to that segment.

Despite Affin Holdings Bhd’s small size relative to its peers, he said that it had the appetite to purchase another bank due to support from its largest shareholder, Lembaga Tabung Angkatan Tentera.

“Affin would be interested in buying AMMB as this would triple the size of its total assets from RM63.6bil now to RM188.3bil. After the merger, the combined group would be larger than HLB,” he said.

However, Affin’s price-to-book value only 0.9 times, which is the lowest among Malaysian banks and below AMMB’s 1.4 times, would be a major hindrance to the merger, he added.