Malaysia’s two largest banks, Maybank and CIMB, are suiting up to duel for a merger with RHB capital, which could result in a US$6.7 billion deal and one of Southeast Asia’s largest banking groups. According to this report from Reuters, competition has caused compressed net interest margins (what a bank takes in from loans and pays out in deposits) and no less than Prime Minister Najib Razak himself has called for Malaysia to create ‘regional banking champions’ to boost investment. This all seems to point in one direction: a round of Malaysian bank consolidation, starting here.

Maybank and CIMB were given permission by Bank Negara Malaysia to begin three months of merger negotiations starting 31 May. Should Maybank succeed it would create Southeast Asia’s largest bank by market value, though a CIMB-RHB merger would rank second below DBS.

The news comes as no great surprise, given the Malaysian government’s overt support for mergers and rumors of the Big Two’s interest in RHB since Abu Dhabi Commercial Bank announced it was sellingĀ its 25% share in March. Japan’s Sumitomo Mitsui Financial Group and the US-based private equity firm Carlyle group had also expressed interest in buying. Whoever succeeds will be required by law to negotiate to purchase another 45% in RHB, currently held by the Employees Provident Fund (EPF).

UPDATE: in the midst of all this, RHB is still pushing ahead with its own expansion plans, possibly looking at medium-to-large acquisitions in Thailand. It has just launched a RHB branch in Bangkok and has already acquired small Indonesian lender Bank Mestika.

source & article: Reuters