Introduction

From the painful lessons of the recent Asian financial crisis where the viability of the financial sectors of the Southeast Asian countries were threatened, the Malaysian regulatory authorities have responded proactively (amongst other measures) by embarking on a programme of strengthening the banking sector. The authorities view that for the long term survival and growth of the Malaysian banking sector, there is a need to organically increase the size of the various participants in the financial sector. To achieve this objective, the authorities have concertedly embarked on a programme of consolidating the number of the various existing financial institutions. The effect of this exercise is to increase the financial base of each entity. Efficiency can be achieved through better management of a lesser number of institutions. The benefits of economies of scale can be achieved. The whole consolidation exercise is to merge the perceived smaller financial institutions with the bigger ones (the “anchor” institutions).

Summary of the merger for domestic banking institutions

Anchor
Commercial Bank
Finance
Merchant Banks
Maybank

1. PhileoAllied Bank
2. Pacific Bank

1. Maybank Finance
2. Sime Finance
3. Kewangan Bersatu

1. Aseambanker M'sia
Bumiputra-Commerce Bumiputra-Commerce Finance CIMB
RHB Bank Delta Finance RHB Sakura Merchant
Public Bank 1. Hock Wah Bank 1. Public Finance
2. Advance Finance
Sime Merchant Bankers
Arab-Malaysian Bank 1. Arab-Malaysian Finance
2. MBF Finance Bhd.
AMMB
Hong Leong Bank 1. Wah Tat Bank 1. Hong Leong Finance
2. Credit Corporation M'sia Bhd.
Perwira Affin Bank BSN Commercial Bank 1. BSN Finance
2. Asia Commercial Finance
1. Perwira Affin Merchant
2. BSN Merchant Bank
Multi-Purpose Bank 1. Sabah Bank
2. International Bank M'sia Bhd
1. Bolton Finance
2. Sabah Finance
1. Bumiputra Merchant Bankers
2. Amanah Merchant Bank
Southern Bank Ban Hing Lee Bank 1. Cempaka Finance
2. Perdana Finance
3 United Merchant Finance
Perdana Merchant Bank
EON Bank 1. Oriental Bank
2. Bank Utama

1. EON Finance
2. City Finance
3. Perkasa Finance

M'sia International Merchant
The Banking Industry
  • It has been an eventful year for the banking sector in Malaysia. With all the 10 anchor banks rushing to meet their deadlines of signing of the sale and purchase agreement on Aug 31 2000 and to complete their merger exercise by 31 December 2000. Out of the 10 anchor banks six have completed their mergers while three are in final stages of completion.

  • The six anchor banks which have completed their merger exercise are:

- Bumiputra-Commerce
- RHB Bank
- Public Bank
- Hong Leong Bank
- Perwira Affin Bank
- Southern Bank

  • The four anchor banks namely Maybank, Multi-Purpose Bank, Arab-Malaysian Banking Group and EON Bank, have received the agreement in principle to negotiate to merge with their respective partners. However, these mergers are subject to regulatory approval.

  • The three banking groups in the final stages of merger negotiation which are waiting for regulatory approval and vesting orders are:

    - Maybank (with PhileoAllied Bank)
    - Public Bank (with Hock Hua Bank)
    - Perwira Affin Bank (with BSN Group)

  • Besides the pending vesting orders for Maybank’s proposed merger with PhileoAllied Bank, the agreement for the acquisition of PhileoAllied Bank by Maybank has been extended by 21 days to complete the pending regulatory approval.

  • Public Bank Berhad (PBB) and Hock Hua Bank (HHB) revised their merger terms. PBB had proposed to acquire the entire paid-up capital of HHB comprising 125.3 million shares from HHB shareholders by issuing 426.28 million new PBB shares of 50 sen each. The new PBB shares issued would be entitled to the proposed PBB bonus issue of up to 848.1 million shares on the basis of three new PBB shares for every 10 existing PBB shares held after the completion of the proposed merger. The revised merger plan is more favourable to HHB. PBB’s NTA will be reduced to RM1.27 from RM1.33. The bank possesses good quality of assets among major listed banking groups. NPLs is estimated at only 2 percent. It is achieving an above industry loan growth of 6.9 percent year-on-year as of September 2000.

  • Arab Malaysian Finance Bhd had announced its mutual termination of the merger agreement with Utama Banking Group. Consequently, Arab-Malaysian banking group applied to negotiate with Danamodal Nasional Bhd to merge with MBF Finance Bhd, whose merger with Multi Purpose Bank did not go through. Utama Banking Group, after the termination of the merger agreement with AMFB, had applied to commence merger negotiations with EON Bank Bhd. Both applications for negotiation have been approved.

    Conclusion

In summary, the whole merger programme is to strengthen the domestic banking institutions in order to compete with the foreign banks that are based in Malaysia. Through the merger programme the local banks can be more efficient and effective.

 


 

 

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