RHB needs to merge to stays Relevant

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Oct 24 2007
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Rashid Hussain Berhad (now delisted) was started with a big-bang under the ambitious mission to turn the empire under the founder Tan Sri Rashid Hussain into a major financial supermarket in the 1990s. Although no longer the captain of the ship, Tan Sri Rashid should be able to smile as the RHB brand still survives until today. But given time and behind the door’s plan, it won’t be long before the name vaporizes into thin air. Furthermore there’ve been too many owners coming in and out the top executive’s door to make the RHB brand relevant anymore.

History proves that by putting the young Sulaiman, Sarawak Chief Minister Abdul Taib Mahmud’s eldest son, onto the chairmanship of RHB was a waste of time to the group. You can’t expect the multi-billion dollar company to move an inch if the chairman was buzy playing games while attending board’s meeting, can you? And now you’ve EPF (Employees Provident Fund) as the new owner. But pension-fund EPF knows very well that banking is not their forte and they’re rushing against time to put everything in order to realize their objective. And their objective is to make money.

You’ve have heard from both EPF-RHB and AmBank Group who denied that they’re talking over a nice cozy dinner about a merger plan. It’s a rather complex decision. On one hand you’ve foreign parties namely Kuwait Finance House, Bank of Nova Scotia and unidentified party who expressed their interest via Goldman Sachs Group Inc. Goldman Sachs was appointed by EPF to manage the sale of its equity interest in the financial services group.

On the other hand EPF needs to reduce its current 82% stake in RHB Capital as under the Malaysian’s Banking and Financial Institution Act (Bafia), an institution can only hold up to 20% in the holding company of a bank. In order to remains relevant and main shareholder in RHB Capital it appears EPF needs to sell its stake to at least two parties. It will be risky to sell the two blocks of stakes to foreigner. So you should take it with a pinch of salt about the denial of merger between both RHB & Ambank.

Today, RHB Group managing director Michael Barret said RHB is “highly unlikely” to achieve its own goal of becoming one of the top three banks in Malaysia by 2012 and in the region by 2020 without merger and acquisitions (M&As). It’s not easy to acquire foreign quality financial institution with RHB’s current strength. It had tried with PT Bank Niaga Indonesia and should know the potential rewards against risks. You need to have very deep pocket to purchase foreign banks which can contribute instantly to your bottom line.

Hence the best bet is still to merge with another strong local bank such as Ambank or even CIMB. If it materialized, the chances of seeing the RHB logo again could be slim.

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