PETALING JAYA: The few deals made by banks recently to acquire insurance companies are not signalling a broad industry shift where banks own insurance companies, according to CIMB Securities.
Deals in question include Malayan Banking Bhd
’s buyout of the remaining 30.95% stake in Maybank Ageas for RM4.83bil, and Bank Kerjasama Rakyat Malaysia Bhd’s RM1.64bil deal for 100% ownership of Takaful Ikhlas Family and Takaful Ikhlas General.
Further, last year, Public Bank Bhd acquired a 44.15% stake in LPI Capital Bhd for RM1.72bil, allowing the lender to immediately scale its presence in the general insurance market through LPI’s prominent subsidiary, Lonpac Insurance Bhd.
The research house quoted an article in StarBiz that alluded the deals sent a clear signal to the market that banks were tightening their grip on the country’s multi-billion-ringgit insurance and takaful industry, while bancassurance was no longer merely a supplementary business attached to traditional banking.
CIMB Securities said the recent transactions reflect institution-specific strategic objectives, with banks pursuing different approaches to fulfil other, broader agendas, such as a strategic alignment at the group level.
Even if insurance and takaful are increasingly important within the banking ecosystem, outright ownership is not inherently superior to the distribution model.
The research house said that banks preferred being asset-light, but having other methods to generate income.
“Securing long-term bancassurance partnerships that generate recurring fee income while providing an important product-distribution channel for wealth-management customers within an extensive cross-selling ecosystem is something banks prefer doing,” it said.
Furthermore, CIMB Securities said it had more to do with shareholder returns than ownership.
For example, the research house said Public Bank’s acquisition was driven by regulatory compliance, as better alignment between both parties will facilitate deeper cross-selling and bancassurance penetration.
As for Bank Rakyat, MNRB Holdings Bhd’s proposed disposal of Takaful Ikhlas’ general and family businesses to it reflected different priorities.
“For Bank Rakyat, the rationale is one of vertical integration, allowing it to internalise a larger proportion of the value chain, capturing both distribution economics and a greater share of underwriting profits,” the research house explained.
The Maybank-Etiqa deal will not create a new earnings stream but remove minority-shareholder constraints over capital allocation, dividend policy, sales incentives and distribution strategy.
“Ultimately, the key consideration is not the percentage owned, but whether the chosen structure or mode of distribution can deliver attractive risk-adjusted returns and sustainable shareholder value over time and enhance capital efficiency,” CIMB Securities said.
With that, CIMB Securities said it would maintain an “overweight” call on the banking sector.
This is because it reckoned banks are capable of consistently converting excess capital into dividends and other special distributions deserve to trade at a premium price-to-book value multiple, even in a more moderate earnings growth environment.
“That said, the cheapest banks may not necessarily be the most attractive. Investor focus should remain on banks that can efficiently and sustainably convert surplus capital into sustainable shareholder returns rather than relying on earnings growth alone.”
