RHB Bank and AMMB Holdings Consider a Merger

By Yantoultra Ngui Features Dow Jones Newswires

KUALA LUMPUR, Malaysia-- Malaysia's fourth- and sixth-largest banks by assets said they are considering a merger that could potentially challenge--but not overtake--the country's third largest bank by assets, Public Bank Bhd. (1295.KU).

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Malaysia's RHB Bank Bhd. (1066.KU) and AMMB Holdings Bhd. (1015.KU) said they obtained approval from the central bank to start merger talks. That approval is valid until Nov. 30.

Both banks said they have entered into an exclusivity agreement to negotiate and finalize terms and conditions of the proposed merger. That exclusivity agreement will expire on Aug. 30.

"It is envisaged that the transaction will effectively be an all shares merger," the banks said in a statement.

RHB's major shareholders include state pension fund Employees Provident Fund, Aabar Investment PJS and OSK Holdings Bhd. AMMB's include Australia and New Zealand Banking Group Ltd., AMMB Chairman Azman Hashim and Employees Provident Fund, according to the banks' latest annual reports.

In January 2015, RHB attempted a three-way merger with the country's second-largest lender, CIMB Group Holdings Bhd. (1023.KU) and nonbank lender Malaysia Building Society Bhd. (1171.KU). That combination would have created Malaysia's biggest bank by assets, overtaking Malayan Banking Bhd. (1155.KU). However, talks fell through mainly due to pricing and a tough operating environment.

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Malaysian Building Society subsequently entered into talks with Bank Muamalat Bhd. That would have created the largest standalone Islamic bank in Malaysia, but the talks fell through. It is now in talks with Asian Finance Bank Bhd. for potential merger.

RHB has assets of 233.52 billion ringgit ($54.55 billion), while AMMB has assets worth MYR134.77 billion. Public Bank has assets of MYR389.73 billion.

"A merger of RHB banking group and AmBank (AMMB) group will create a stronger fourth largest banking group, creating scale and market leadership across key business segments," said Khairussaleh Ramli, RHB's group managing director.

AMMB's group Chief Executive Sulaiman Mohd Tahir said the deal would create a stronger business and financial presence.

Shares of both the banks will resume trading on Friday after being suspended Thursday. Shares of RHB last closed 0.2% higher at MYR5.39, while AMMB shares were up 2.2% at MYR5.21.

Write to Yantoultra Ngui at yantoultra.ngui@wsj.com

(END) Dow Jones Newswires

June 01, 2017 05:20 ET (09:20 GMT)