What’s next for RHB?
Analysts do not discount the possibility of another round of M&A
MANY have been asking what the future holds for RHB Capital Bhd following the successful acquisition of the investment banking arm of OSK Holdings Bhd, which will make the banking group’s investment banking arm, led by RHB Investment Bank Bhd, the largest in the country by assets.
The banking group will be a 100 years old come July next year. It celebrated its 100th anniversary last Friday.
The celebrations took place amid looming changes in the local banking and financial services industry, which has already seen a spate of mergers and acquisitions (M&As) in the past couple of years, both at home and in the region.
Last year, there was speculation that the group was a target of Malayan Banking Bhd (Maybank) and CIMB Group Holdings Bhd, respectively the largest and secondlargest banking and financial services groups in the country in an M&A exercise reportedly worth RM20bil.
The M&A talks were called off a month after it began. Last Friday, RHB Capital managing director Kellee Kam pointed out that the group had been growing through “inorganic means” over the past decade and did not discount growth through this path going forward.
Banking analysts have also not discounted the possibility of another round of M&As involving RHB Capital as they said the domestic banking industry would need to further consolidate and scale up to compete effectively in the wider Asean region.
They added that besides RHB Capital, Maybank and CIMB have ambitions in the region and consolidation would boost their presence not only domestically but also in the region.
It is notable that RHB, Maybank and CIMB all have similar ambitions to be a banking force to be reckoned with regionally and could benefit from having larger scale which could boost its presence both overseas and domestically.
Maybank and CIMB have operations in Indonesia, a vast untapped market while RHB Capital is trying to finalise its acquisition of PT Bank Mestika Dharma.
But the local players are up against intense competition in the M&A game as they are smaller than some of their Asean counterparts such as Singapore’s DBS Bank Ltd and the Oversea-Chinese Banking Corp. So a bigger bank will help spur local banking groups to compete for bigger deals around Asean.
This will become increasingly necessary as margins narrow with the increasingly saturated domestic market. In any case, deals such as M&As in the region will be also necessary as intra-regional trade links become closer.
RHB Capital is no stranger to M&As, the current name was assumed only in 1997, as emerging Asia stood at the brink of a financial crisis. It came about through the merger of Kwong Yik Bank Bhd and the Development and Commercial Bank ( D&C), which also saw the emergence of bumiputra entrepreneur Tan Sri Abdul Rashid Hussain as the group’s executive chairman. The bank’s current initials comes from his name.
Kwong Yik was founded by the Chinese community led by Wong Loke Yew, or better known as Loke Yew in July 1913. His name graces one of Kuala Lumpur’s main thoroughfares while the D&C Bank (which later became known as DCB Bank Bhd) was established in 1966 by the then Finance Minister Tun Sir Henry H.S. Lee.
In the aftermath of the Asian financial crisis, RHB Capital was merged with troubled Sime Bank Bhd in 1999.
Four years later, the bankinggroup was merged with Kuching-based Bank Utama Bhd, the banking arm of Cahya Mata Sarawak Bhd, which saw the exit of Rashid.
RHB Capital’s pedigree recalls to a certain extent, the history of the country’s banking and financial services industry. Today, the controlling shareholder is the Employees Provident Fund, which owns a 45% stake in the group.
As the provident fund has always been a careful manager of its members’ savings, it may be that the next step for RHB Capital will depend on what the provident fund wants to do with its stake.