Malaysia's CIMB announces megabank merger

CK TAN, Nikkei staff writer

People are seen in front of a CIMB bank office in Kuala Lumpur. © Reuters

JAKARTA -- CIMB Group Holdings, a leading Malaysian bank, announced on Thursday that it has regulatory approval to commence negotiations with two local banks to establish a mega commercial and Islamic bank. 

    Over the next three months, CIMB will negotiate with midsize RHB Capital and Malaysia Building Society to form an enlarged commercial and Islamic bank by merger.

    "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," said Nazir Razak, the CIMB Group CEO, in a press release on Thursday. The three banks had combined assets of 614 billion ringgit ($193 billion) at the end of March 2014.

     Under Nazir -- the youngest brother of Prime Minister Najib Razak, -- CIMB has become Malaysia's second-largest bank through mergers and acquisitions of regional financial institutions.

     CIMB acquired the Royal Bank of Scotland's Asia-Pacific investment banking assets two years ago, and has a strong presence in Singapore's investment banking sector. It also has subsidiaries in Indonesia and Thailand listed on the local stock exchanges.

     All three banks have Malaysian government institutions as shareholders. CIMB is part owned by state pension funds Khazanah Nasional (28%) and Employee Provident Fund (15%). The latter also has major shareholdings in both RHB Capital and Malaysia Building Society.

     The merger will augment CIMB's capital base and banking network as the ten-member Association of Southeast Asian Nations (Asean) gears up for financial liberalization in 2015. In Malaysia, Prime Minister Najib's government has been encouraging big companies -- especially ones with links to the state -- to look outwards and become world-class players.