KUCHING: The highly anticipated merger between RHB Bank Bhd (RHB) and AMMB Holdings Bhd (AMMB) has been officially put to rest as the two banks announced on Tuesday that they would be formally ending their merger discussions.
In press statement filed on Bursa Malaysia, the banks confirmed the decision was a mutual one and that it had occurred because they were not able to reach an agreement on mutually acceptable terms and conditions for the proposed merger.
With the end of the merger talks, both banks guided that they would confident in moving forward alone and reiterated that they would continuing on in executing their current strategies and initiatives.
Overall, the development has garnered mostly negative views from analysts with most hailing the development as negative.
One such cynic is the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research), who regarded the development as a ‘missed opportunity’ and viewed it as a negative development.
In a corporate update, they explained that merger was a loss for both parties as it would have solidified RHB’s position as the fourth largest bank in terms of asset size in Malaysia while propelling AMMB to the same position by being part of a larger entity.
“To put this into context, we had estimated that the total asset of the merged company to be approximately RM368.23 million, where its number three peer asset size as at second quarter of financial year 2017 (2QFY17) was RM391.1 million.”
Adding to this, the research arm also pointed out the failed merger meant that AMMB shareholders would have missed out on potential earnings accretion as they had previously estimated an increase of 25 sen to AMMB’s book value per share.
And while AMMB has guided that they will be continuing on with their FY18 Top 4 strategy, the research arm believes that more needs to be done especially in growing their net interest income (NII).
In opposing this view, the research arm of Hong Leong Investment Bank Bhd (HLIB Research) suggested that the impact of the development towards RHB would be slightly positive as the bank and its shareholders would no longer be subjected to the fear of possible return on equity dilution from the merger.
Looking forward, they reckoned that the bank would move to focus on expanding in SME and corporate loan segment while resuming efforts in its transformation programme – IGNITE 2017.
While HLIB Research did no comment on whether the impact of the merger’s call off would be positive or negative to AMMB, they did however note that the bank would be experiencing some Net Interest Margin (NIM) recovery in FY18 as they continue to shield itself from higher fixed deposits and active funding cost management.
Meanwhile, investor sentiments in both banks seem to be reflective of the two opposing views as share prices for both banks soared initially yesterday following the breaking of the news of failed merger talks, before deviating in results.
RHB’s positive sentiment continued up to closing yesterday, expanding by 3.89 per cent to RM5.07, while AMMB’s share price which initially saw expansion has since declined by 2.34 per cent to close at RM4.59.
Looking forward HLIB Research also comment that they, “foresee the banking sector merger and acquisitions (M&A) activities to take a breather for a while.
“That said, the focus of the next round of M&A is on Malaysia Building Society Bhd (MBSB) and Asian Finance Bank Bhd (AFB), after MBSB had obtained the clearance from the Ministry of Finance to acquire AFB on August 20.”