MBSB seeks BNM nod on AFB merger plans

> Proposed corporate exercise will create second largest Islamic bank in Malaysia

PETALING JAYA: Malaysia Building Society Bhd (MBSB) has applied to Bank Negara Malaysia (BNM) for approval from the central bank and/or the Finance Ministry for its proposed merger with Asian Finance Bank Bhd (AFB).

MBSB had in last December received nod for talks on the merger plan.

“Further announcements shall be made upon receipt of the decision from BNM,” MBSB said in a filing with the stock exchange yesterday, without giving any further details of its plans.

This is the furthest MBSB has managed to proceed with its merger plans after two failed proposed corporate exercises with Bank Muamalat in 2016 , and a three-way merger with CIMB Group Holdings Bhd and RHB Capital Bhd in 2015.

The proposed merger will create the second largest Islamic bank in the country with total assets of around RM48 billion.

MBSB aims to become an Islamic financial institution by 2020 through its merger with AFB. The full bank licence will allow MBSB to tap into new financial services segments which it cannot offer at the moment, such as trade facilities, collecting current account savings account (CASA) deposits and offering other interbank instruments to expand its business.

AFB, a full-fledged Islamic bank that was incorporated in Nov 28, 2005, has a branch each in Kuala Lumpur and Johor Baru as well as a representative office in Jakarta, Indonesia according to its website.

Analysts have expected that the deal would translate into a price of about RM550 million to RM600 million, based on 1.1 to 1.2 times premium of AFB’s ninemonth book value of RM500.1 million for FY16.

Merger talks have included negotiations with AFB’s Middle East shareholders – namely Qatar Islamic Bank (66.67%), RUSB Investment Bank Inc (16.67%), Tadhamon International Islamic Bank (10%) and Financial Assets Bahrain WLL (6.67%).

The Employees Provident Fund (EPF) is the single largest shareholder of MBSB with a 65.28% stake.