CIMB eyes merger to form mega bank

A branch of the CIMB Bank is seen in Taman Connaught, Kuala Lumpur. Malaysia’s second largest bank has secured central bank approval to commence merger talks with RHB Capital and Malaysia Building Society to create the country’s biggest bank.

AFP

Kuala Lumpu

Malaysia’s second largest bank CIMB Group has secured central bank approval to commence merger talks with RHB Capital and Malaysia Building Society to create the country’s biggest bank, media reports said yesterday.

The merger plan comes as Malaysia hopes the financial sector will help realise the government’s vision of transforming Malaysia into a developed economy by 2020.

The target is to double income per capita to 48,000 ringgit ($15,000) in the next six years.

“The potential merged entity will have total assets of 614bn ringgit. This will knock Maybank, which has total assets of about 578bn ringgit, off the pole position,” the New Straits Times said yesterday.

On Thursday, CIMB, RHB Capital, which is Malaysia’s fourth largest bank, and Malaysia Building Society said they had entered into a 90-day exclusivity agreement to negotiate the proposed merger of the three entities and “the creation of a mega Islamic bank”.

“There is a prima facie case for a value-creating merger between the three entities and we want to get into detailed discussions to validate it,” CIMB group chief executive Nazir Razak said in a statement.

Nazir, who is the younger brother of Prime Minister Najib Razak, is set to quit as CEO in September and become the bank’s chairman.

On the prospects of the creation of a mega Islamic bank, Ahmad Zaini Othman, Malaysian Building Society president and CEO said: “The opportunity to be a part of a mega Islamic bank is exciting for us and we want to take this forward.”

Malaysia, Southeast Asia’s third-largest economy after Indonesia and Thailand, hopes to become an important gateway into booming regional markets, while in Islamic finance it is determined to position itself as the leading international centre. Islamic banking fuses principles of Islamic Shariah law and modern banking methods. Islamic funds are banned from investing in companies associated with tobacco, alcohol or gambling. Shariah-based finance also bans interest, which is seen as usury, and risks are shared between the creditor and borrower.