Bank Negara: Banking M&As driven by market

Central bank says it does not interfere with negotiations

PETALING JAYA: Mergers and acquisitions (M&As) in the banking industry are driven by the market, which in turn is based largely on commercial and business considerations, Bank Negara said.

In a response to a StarBizWeek article last Saturday, which was on what led to the collapse of the proposed merger between AMMB Holdings Bhd (AmBank) and RHB Bank Bhd, the central bank reiterated that “it does not and will not interfere with the negotiations between any of the parties involved.

“Bank Negara plays the role of an enabler in facilitating the merger process,” it said in a statement.

The central bank said it gives the approval for the parties concerned to discuss and negotiate within a stipulated time frame.

“During this period, the parties will conduct a comprehensive assessment on the merger after weighing in various considerations.

“These include assessment of potential synergies as well as risks arising from their respective busi- ness models, operations and systems and after taking into account extensive analysis of both financial and non-financial information,” it said in the statement.

“It is also the fiduciary duty of the board of directors of the respective entities to ensure that the merger would ultimately take into account the best interest of stakeholders, in particular that of the depositors and shareholders.”

“In conclusion, mergers in the banking sector are mainly driven by the business considerations of banking institutions themselves.”

“It is therefore inaccurate to conclude that the deal is likely to have failed because the central bank was the only driver pushing the deal to go through,” it stated.

Last week, AmBank and RHB mutually agreed to end discussions on the planned merger of the two banking groups as both parties failed to reach an agreement on mutually acceptable terms and conditions for the proposed merger.

With the cessation of the merger discussions, the exclusivity period following the exclusivity agreement entered into by both parties on June 1, 2017 has automatically lapsed. Banking consolidation has become increasingly difficult in the Malaysian financial sector due to valuations.

Of the local banks, Public Bank Bhd is the most expensive financial institution, trading at some 2.3 times book value. Most banks trade between 0.4 times and 1.4 times.

Earlier, RHB group managing director Datuk Khairussaleh Ramli had said with the decision, the bank would continue to execute its initiatives under its current strategy to create value for its shareholders, and focus on delivering superior customer experience.

AmBank Group chief executive officer Datuk Sulaiman Mohd Tahir said given the heritage and strength of the AmBank Group, it was confident of moving forward despite the fact that the merger did not materialise.

“Our group’s strategy and direction remains the same. We remain focused on our 2018 business plan, as we work towards running the bank better and changing the bank while delivering optimal returns for our shareholders,” he said.