CIMB (Commerce International Merchant Bankers), an investment bank of Bumiputra-Commerce Holdings Berhad (KLSE: COMMERZ, stock-code 1023) has been mulling the idea of having smaller number of banks via numerous press reports. And if the latest statement by its chief executive officer Nazir Razak (brother of current Malaysia Deputy Prime Minister) is anything to goes by, FinanceTwitter would interpret it as the readiness of the group to start gobbling another bank or two.

The chief of CIMB predicted that the number of Malaysian lenders may be down to six in the near term. He said “We need to accelerate consolidation, and it is my personal opinion that, perhaps, regulatory intervention is necessary to get it done quicker ahead of liberalization … Otherwise, the local players may not be able to withstand the forces of liberalization.”
With politicians normally putting their hands in the business policies, it’s not difficult to push merger with a stroke of an announcement. Malaysia Central Bank (Bank Negara) just needs to make a simple announcement that local banks need to raise the minimum capitalisation or shareholders’ fund from existing RM2 billion to a higher figure to make the rest of the banks scrambling looking for new partner(s).

Nazir might be speaking from his comfort zone of being the chief of the second biggest bank in Malaysia, giving him the advantage of being an acquirer than acquiree. I wonder if he would have opens his mouth should he be the chief of one of the smallest banks. While it makes perfect sense to consolidate further to face the full force of globalization and liberalization, the decision to merge nevertheless should come from shareholders themselves, with minimum regulatory intervention – as reported by BusinessTimes.

So if you’re a punter which bank should you watch-out to potentially make money out of the merger news (if it indeed happens)? Going by the normal trend, the three smallest banks namely EON Capital Berhad (KLSE: EONCAP, stock-code 5266), Malaysian Plantations’ Alliance Bank (KLSE: MPLANT, stock-code 2488) and Affin Holdings (KLSE: AFFIN, stock-code 5185) should be your choice. But then in Malaysia corporate world whereby the smaller piranha could gobble up a buffalo, you simple won’t know if there’re still surprises in the closet.

One thing is sure though, CIMB is preying one of the banks sitting at the bottom in terms of capitalization.

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July 20th, 2007 by financetwitter

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