EPF will be clear winner in transaction, say analysts

KUALA LUMPUR: The Employees Provident Fund (EPF) will be the clear winner in the proposed merger between RHB Bank Bhd and AMMB Holdings Bhd (AmBank Group) as the retirement fund will likely emerge as the largest shareholder in the new entity, said analysts.

The potential merger was set to revitalise both banks’ financial performance, with the new entity becoming the country’s fourthlargest banking group by market capitalisation and asset size, they added.

Assuming the new entity was merged on a share-swap basis, Kenanga Research said EPF, being the largest shareholder in RHB with 40.7 per cent, would still be the largest shareholder in the new entity at 29.1 per cent.

“EPF is still the winner. The positions of Australia and New Zealand Banking Group Ltd and Aabar Investments PJS in the new entity are estimated to be likely lower at 10.2 and 10.1 per cent, respectively,” it said in a note.

Kenanga Research said the merger would push the entity to third place in terms of profitability, based on RHB and AmBank’s year-end financial results.

“Its gross impaired loans ratio will be lower than Malayan Banking Bhd (Maybank) and CIMB Bank Bhd, both at 2.28 and 3.29 per cent, respectively.

“Cost-to-income ratio will be better than CIMB at 53 per cent versus 54.4 per cent. The new credit costs will be lower at 0.17 per cent after Public Bank Bhd (the lowest).”

An analyst from MIDF Research said the rivals of RHB and AmBank had grown by leaps and bounds in terms of loan and deposit growth, and net interest income.

“The merger makes logical sense given the lacklustre performance of both banks over the past few quarters. A merger will certainly revitalise the banks,” he told NST Business.

The analyst said the merger would solidify RHB’s position as the fourth-largest bank in the market, with new asset size closer to that of Public Bank.

The merged entity will have an asset size of RM368 billion compared with Public Bank’s RM389 billion, CIMB’s RM506 billion and Maybank’s RM745 billion.

“It will have a market capitalisation of RM37.3 billion, overtaking Hong Leong Bank Bhd which has a market capitalisation of RM28.7 billion as at Wednesday, to come in at fourth place.

“The entity, however, is still far from the third-largest bank by market capitalisation, CIMB, which has RM58.8 billion. The leaders are Maybank and Public Bank, with RM96.7 billion and RM77.5 billion market capitalisation, respectively,” he added. Amir Hisyam Rasid