Permodalan Nasional: It Is Probably the Right Time for Proposed Merger of AMMB and RHB Bank

By Yantoultra Ngui Features Dow Jones Newswires

KUALA LUMPUR, Malaysia--Malaysian state-owned fund manager Permodalan Nasional Bhd. said the proposed merger between the country's fourth- and sixth-largest banks came at the right time, according to group Chairman Abdul Wahid Omar.

Continue Reading Below

Malaysia's RHB Bank Bhd. (1066.KU) and AMMB Holdings Bhd. (1015.KU), the country's fourth- and sixth-largest lenders by assets, respectively, said in early June that they got approval from the central bank to start merger talks that could potentially challenge--but not overtake--the position of the country's third-largest bank by assets, Public Bank Bhd. (1295.KU).

Permodalan Nasional, Malaysia's biggest state-owned fund manager with assets under management of about 265.6 billion ringgit ($61.97 billion) as of May, is a shareholder in both banks, holding a 9.64% stake in RHB and a 7.16% stake in AMMB.

"I think given that the fact that valuation [of both banks] is about one-time book value, it is probably the right time to do the merger," Mr. Wahid said at a news conference for Permodalan Nasional's first-half performance.

He said Permodalan Nasional is always supportive of transactions that add value for shareholders.

Analysts who attended a briefing by RHB after the proposed merger announcement earlier this month said RHB would be the acquirer in the all-stock deal and would pay AMMB's shareholders a one-time multiple of AMMB's book value, which is near where the banks are both trading at now.

Continue Reading Below

RHB's current market capitalization amounted to MYR20.61 billion, while AMMB's amounted to MYR15.34 billion.

But analysts said the merger may not create much synergy as both banks had very similar target markets, such as small-and-medium-size enterprises and mortgages markets.

Permodalan Nasional's Mr. Abdul Wahid said the combined bank would need to address duplication, in terms of their branch network and people, in addition to other issues.

But he said he believed both banks had CEOs that could drive the merger effectively.

Besides Permodalan Nasional, AMMB's other large shareholders are Australia & New Zealand Banking Group Ltd. (ANZ.AU) and AMMB's founder and Chairman Azman Hashim. Both have previously hinted at plans to exit AMMB.

RHB's major shareholders include state pension fund Employees Provident Fund, Aabar Investment PJS and OSK Holdings Bhd., according to the banks' latest annual reports.

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

(END) Dow Jones Newswires

June 22, 2017 06:14 ET (10:14 GMT)