RHB Bank, AmBank up as investors positive on merger

KUALA LUMPUR: RHB Bank and AmBank climbed early Friday as investors were positive on the proposed merger of the banks.

At 9.12am, RHB Bank and AmBank were up 14 sen each to RM5.53 and RM5.35.

The FBM KLCI was up 7.01 points or 0.4% to 1,770.12. Turnover was 170.86 million shares valued at RM77.68mil. There were 236 gainers, 84 losers and 196 counters unchanged.

RHB and AMMB had obtained Bank Negara Malaysia’s (BNM) approval to commence discussions for a potential merger, and both parties have entered into an exclusivity agreement to negotiate.

Maybank Investment Bank Research is neutral to slightly positive on the potential RHB-AMMB merger. 

It said on Friday the merger valuations are decent and the impact on financials is expected to be marginal.

“The success of this merger will nevertheless very much depend on driving revenue/cost synergies as quickly as possible. 

“One risk is of a potential share overhang post-merger, which could be mitigated if a strategic shareholder can be identified. 

“We maintain our Hold call on RHB and AMMB,” it said, with target prices of RM5.45 CY18E price-to-book value (PBV) 0.9 times; return on equity (ROE): 9.7% and RM5.25 (CY18E PBV 0.9 times; ROE: 8.4%) respectively.

However, UOB Kay Hian Malaysia, in its comments, said as discussions are in the preliminary stage, details are scant. 

“We do not discount the longer term upside from a cost synergies perspective. However, this will require a certain gestation period with the market likely to focus on the immediate term earnings dilution. 

“We maintain our Sell call on RHB Bank (Target: RM4.65) and Hold for AMMB (Target: RM4.90) given the lower share price downside to our target price,” it said.