Political obstacle to bank M&As

Rate hike poser: S&P expects the central bank to raise the overnight policy rate by 25 basis points by the end of this year. — AFP

PETALING JAYA: Despite the clear merits for further consolidation in the Malaysian banking sector, the negative implication from such exercise could pose a challenge to executing merger and acquisition (M&A) deals in the industry, said Standard & Poor’s Global Ratings (S&P).

According to S&P director of financial institution ratings Ivan Tan, bank consolidation in the country could be politically hard to execute, as cost synergies from such exercises imply potential branch closures and a reduction in headcount, which could lead to higher unemployment.