RHB Bank and AMMB said the transaction will effectively be an all shares merger.
KUALA LUMPUR: Maybank Investment Bank Research is maintaining a Hold call on RHB Bank and AMMMB pending the release of their financial results after their proposed merger was called off.
It said on Wednesdayit is now business as usual for both banks that have to now strive to improve on their return on equity (ROEs), which are expected to trend below 10% in the near term.
“We maintain our Hold call on both banks with unchanged TPs of RM5.25 for AMMB (pegged to a CY18 price-to-book value (PBV) target of 0.9 times; ROE: 8.4%) and RM5.45 for RHB (pegged to a CY18 PBV target of 0.9 times; ROE: 9.7%),” it said.
Both banks had on Tuesday said they “were not able to reach an agreement on mutually acceptable terms and conditions”. This announcement comes just days ahead of the Aug 30 expiry of the exclusivity agreement to negotiate. No concrete reason was given for calling off the merger.
To recap, Maybank Research said mergers are proving quite difficult, from the looks of it, with this being the second time in recent years that a proposed merger has been called off; the previous one being the proposed CIMB-RHB-MBSB merger back in 2014.
“It is back to square one and the focus will be on the operational and financial performance of both banks as they announce their results over the next couple of days.
“We would have been neutral to slightly positive on the potential merger, for merger valuations, if at one time book value for both banks, would have been decent and the impact on financials would have been marginal, by our estimates.
“Undoubtedly, much of the post-merger success would have hinged on driving synergies, particularly cost synergies, but this was a merger that seemed to make sense towards creating a larger domestic bank that would have been fourth largest by asset size,” it said.
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