Will RHB Falls to Foreigners or Sleeps With CIMB?

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Apr 04 2007
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Canada’s Bank of Nova Scotia (TSE: BNS) is open to talks to buy a stake in Malaysia’s fourth-largest lender, RHB Bank. Scotiabank, Canada’s third biggest bank in terms of assets now has just five branches in Malaysia after 14 years of presence. Citigroup (NYSE: C, stock) has seven after 49 years, Standard Chartered (LON: STAN) bank 37 after 132 years and HSBC Holdings Plc. (HKG: 0005) 40 after 123 years.

After opening a new Scotiabank branch outside of Kuala Lumpur, one of four new outlets recently approved by Malaysia’s central bank, its’ senior vice-president for Asia Pacific Michelle Kwok said “We are always interested in opportunities to expand our presence, especially in a market like Malaysia. If it aligns with our bank’s strategy, we are open to discussion.”

After a successful $3.68 billion bid for parent companies RHB Capital (RHBCAP: stock-code 1066) and Rashid Hussain Bhd (KLSE: RHB, stock-code 1309) last month, Malaysian state pension fund EPF (Employees Provident Fund) is at the stage of finding strategic equity partner with intention to sell down as much as 35 percent.

Today, Reuters reported that EPF might see CIMB Bank, an investment bank of Bumiputra-Commerce Holdings Berhad (KLSE: COMMERZ, stock-code 1023) as a new partner to merge both RHB Bank and CIMB Bank to rival Malaysian largest bank Malayan Banking Berhad (KLSE: MAYBANK, stock-code 1155). RHB Bank with its’ 200 branches nationwide would be a good fit to CIMB as its’ strong presence in retail banking will add weight to CIMB’s investment and wholesale banking.

The merger of CIMB Bank and RHB Bank will create a new giant with combined assets of $ 70 billion. An announcement of such merger within short-time period might be out of question as RHB Bank has yet to be re-structured to solve its’ huge debts. But then with the brother of deputy Prime Minister Najib at the helm of CIMB, such a possibility cannot be rule-out in a country like Malaysia where politic and business are like twin brothers.

Besides the above two potential marriage partner, EPF is said to be flirting with other partners such as Kuwait Finance House ( KFH ), British banks Barclays (LON: BARC) and Royal Bank of Scotland (LON: RBS).

Who do you think EPF will sleep with? Please do not forget CIMB managed to launch the successful hostile take over of Southern Bank (one of the remaining and most profitable Chinese-based banks in Malaysia) recently despite rejection from its founder. But the rumor in the market is that the deputy Prime Minister is not getting along well with premier Badawi. So strong was the rumor that the deputy Prime Minister has to call a press-conference to deny it. In Malaysia’s politic, you’ll never know the ultimate winner till the last minute as the stories and the games could easily beat Hollywood’s box-office should it be made a film.

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