The merger between RHB Bank and AmBank might affect consumers as they will have less choice when it comes to banking. File Photo
KUCHING: Consumers might be inversely affected by the upcoming merger between RHB Bank Bhd (RHB) and AMMB Holdings Bhd (AMMB) which is currently undergoing talks.
While the merger would be beneficial to the financial sector, Danny Wong, chief executive officer and director of Areca Capital Sdn Bhd – an investment management firm – said it may not necessarily impact consumers positively.
“To the financial sector, the merge hopes to create a bigger banking entity with a larger capital base – which will overall benefit the sector on the whole,” he told The Borneo Post yesterday.
“However, for consumers, this would mean that the sector will have one less bank which translates to less choices for them. This applies to investors as well.”
With less choices to pick from, consumers and investor will find that they have less power in influencing the financial sector and its products offered due to decreased competition among industry players.
Wong further said the merger which will create the fourth largest bank in Malaysia may not even display increased synergy as the two banking groups are similar in certain ways.
“They are both heavily involved in much of the Small Medium Enterprise (SME) segment which limits their synergy.
“However, on the other view, RHB does have regional exposure whereas AMMB is purely domestic,” he explained while noting that the merger would also allow the new entity to have better compliance to Basel III.
As the two banking groups overlapped in certain segments, Jonathan Chai Voon Tok, the secretary general of the Kuching Chinese General Chamber of Commerce and Industry (KCGCCI) said this may lead to potential downsizing or retrenchment exercises.
“We could probably expect some cost rationalisation exercise following the completion of the merger given the degree of operational duplication between the two banks.
“This could mean closure of some branches and downsizing or retrenchment of staff,” he told The Borneo Post.
The merger would also diminish RHB’s local branding within Sarawak which may lead to potential banking opportunities to other players to fill the niche, Chai added.
“While RHB is traditionally regarded as a Sarawak-based bank, the ‘local feature’ attached to it would probably diminish following the merger.
“Substantively, the local businesses would like to see the setting up of a local boutique bank to serve the business community here, particularly the small and medium enterprises.
“Such a bank is expected to know the local business environment better and more sensitive to the financial needs of the local business community.”
However, Chai pointed out that the merger would be a significant threat to foreign banks looking to expand into the domestic market.
“The combined strength of both banks in key business segments, particularly in retail and investment banking ,will bode well for RHB and AMMB.
“If the proposed merger takes place, it will create greater synergy for the enlarged banking group and better position themselves in anticipation of a more competitive banking industry amidst a more relaxed regulatory entry for foreign banks.”