RHB mega-merger: ‘Najib must be accountable’

Jun 12, 11 | MalaysiaKini

DAP has asked Prime Minister Najib Razak to explain why Bank Negara is pushing hard for the RHB merger with one of Malaysia’s two largest banks when the move would lead to foreign exchange outflow and an unhealthy monopoly.

“Najib should present ministerial statement in Parliament tomorrow on the rationale and status of Bank Negara’s (approved) merger between RHB Capital with (either) Maybank or CIMB Group to create Southeast Asia’s biggest bank,” said DAP veteran Lim Kit Siang in a statement today.

“Basic principles and questions about Bank Negara’s push for the country’s largest corporate merger need to asked and clarified,” he said.

The Ipoh Timor MP was referring to yesterday’s comment piece in The Sun that described Bank Negara’s nod of approval to the RHB merger as an endorsement of the move that could potentially have adverse effects on the country’s economy.

Lim said it was worrying that the merger would result in a handsome payout to RHB’s foreign stakeholder Abu Dhabi Commercial Bank (ADCB), which is selling its 25 percent share in RHB Capital, and lead to a foreign exchange outflow from the country that only benefitted ADCB at our expense.

“The competition between the two bidders only helps to push the market share of RHB Capital higher, to a 14-year record high of RM10.40 per share on June 1, as compared to its book value of RM4.79 per share.

“Who actually benefits from the process? What good would that do to the people of Malaysia?” he asked.

‘Bigger not better’

The Sun’s article titled ‘Let’s all be wise and sensible’ commented that the merger would not add any value to the market, as it was a purely local exercise involving domestic players that serve a similar clientele.

Lim said that the merger would lead to a bigger monopoly in the financial sector that recent crises involving US’s Lehman Brothers.

“Historical lessons should be drawn from the recent financial crisis, in which big does not equate better. Big corporation has found to have more difficulty sustaining in time of crisis, as can be seen in the case of the Lehman Brothers, Citigroup and the American Insurance Group to name a few.

“Whose money will be used to save these ‘too big to fail’ corporations at the end of the day? We all know that it’ll be none other than the taxpayers,” he said.

The DAP stalwart added that as all the main players in the merger wrangle have public interests, such as the Employee Provident Fund (EPF), the finance ministry had a duty to be held accountable for what he called “the country’s biggest merger”.

“EPF is set to earn a good profit by releasing a portion of its share in RHB capital which has benefitted from the wide speculation.

“As the trustee of the hard-earned money of the working class, Malaysians want EPF to be held accountable for the management of the (profit from the merger). Would they invest elsewhere? Or would they translate it into a bigger interest return to the employees?” asked Lim.

A merger with Maybank is speculated to overtake Singapore’s DBS Group in terms of combined market capitalisation of US$28.8 billion, making it one of the largest banks in Southeast Asia.

While a CIMB-RHB merger on the other hand, would see a combined market capitalisation of US$27.3 billion, just marginally below DBS but overtaking both Singapore’s OCBC and UOB.

In terms of asset size, DBS, OCBC and UOB stand at US$238bil, US$198.4 billion and US$178.8 billion respectively.

  1. #1 by Thor on Sunday, 12 June 2011 - 10:53 pm

    Those bustards are getting bolder and bolder each day.
    Siphoning off our country’s money in many ways.
    Even if they’re to lose in the next GE, it really does not matter much to them for they’re better off than king after that.
    Even Forbes’s richest man could not compete their wealth.

  2. #2 by HOHOHO on Sunday, 12 June 2011 - 11:10 pm

    MEGA PUKE!…just by a look at those B-eNd goons sick RACIST faces n no matter how they MERGE this n that…..no concerns to the ‘RAKYAT’….bcoz they will still INCREASE this n that + ROB + CHEAT us all….WAKE UP la ‘RAKYAT’ before they suck all of us dry!!!!!!!!!!!!!!!

  3. #3 by -e- on Sunday, 12 June 2011 - 11:39 pm

    it will not be a surprise if someone will be cashing out a handsome commission from abu dhabi, robbing directly from the taxpayers!

  4. #4 by PoliticoKat on Sunday, 12 June 2011 - 11:49 pm

    How often do you see a central bank push for the merger of two companies? It is like the US government pushing for the Merger of Microsoft and Apple to produce the largest computer company in the world.

    I am willing to bet RHB is loaded with bad loans and is in danger of going under, unless it is infused with lots on money, which this merger will provide.

    And it is without doubt, the merger will save the wealth of the person(s) who is giving instructions to bank Negara to push for this merger.

  5. #5 by Jeffrey on Monday, 13 June 2011 - 12:32 am

    RHB is not doing badly, in fact it has done well. From sources, RHBCap, the country’s fourth largest banking group by assets, saw its net profit breach RM1 billion for the first time in 2008, then move on to an all-time high of RM1.4 billion last year. When Abu Dhabi Commercial Bank (ADCB) sells its 25% equity stake an supposedly take foreign exchange out, don’t forget what it takes its a difference between disposal and its earlier acqusition in which it brought foreign exchange in. ADBC paid RM3.9 billion, or RM7.20 a share, for its stake in RHBCap in mid-2008. At RM8.03 ADCB’s stake is RM4.3 billion – difference about RM400 million? Not that big, is it on comparative basis for corporate M&A deal? (IF Carrefour had not aborted its sale, RM1.2 billion would have gone out!) ADBC wants exit because (i) it was exposed to debt-ridden Dubai World (ii) regulatory complications (per our Competition Act/BAFIA) given the fact that Abu Dhabi govt tht owns ADCB also owns National Bank of Abu Dhabi that was recently given a commercial banking licence. Same ultimate cannot own 2 bank licences through its two vehicles/entities. Our 2010 Competition Act is supposedly antitrust and eschews big monopolies. Somehow policy-wise the banking industry & big banks like MBB/CIMB are exempted.

  6. #6 by Jeffrey on Monday, 13 June 2011 - 12:52 am

    If one does not want FX exit then get foreign investors to come in. Its rumoured that China Construction Bank & several banks from the Middle East, including Qatar, are keen on ADCB’s 25 per cent stake in RHBcap.

    Why policy-wise give to MBB or CIMB that is already that big in their respective right? To make them even bigger?We have just passed the Competition Act 2010 (to be implemented next yr?) Policy-wise the aim of the Act is to promote a free and competitive market. How could this ground for competition be prepared or 2012 when policy-wise one makes the already mega MBB or CIMB even bigger? With their links to govt institutions, wouldn’t giving RHB to them would make these near Government-sanctioned monopolies/banking monolith contrary to spirit of Competition Act? We’re still in Mahathir of Big is Good Banking Consolidation then stage 1 & now stage 2??

  7. #7 by yhsiew on Monday, 13 June 2011 - 1:30 am

    Remember in 2008 when Maybank bought a stake in Bank International Indonesia (BII) and made a loss of RM 2.75 billion (reported by Malaysia Today). It makes one wonder whether the RHB mega-merger would meet the same fate as Maybank!!

  8. #8 by monsterball on Monday, 13 June 2011 - 4:01 am

    Merge here and invest somehwere else and loose money…where money vanished into thin are and wait for bail outs ..exactly like before.

  9. #9 by monsterball on Monday, 13 June 2011 - 6:22 am

    I am so glad to read comments that shows Malaysians are no fools.
    I advise Malaysians to save … deposit and do business with International banks.
    Especially up and coming companies.
    The day you expereince all sorts of inteferences from the Govt. is too late.
    You grow big…they want a piece of your company….FOC….saying must have Malays or license cancelled.
    Thousands minority Malaysians suffered suffered like so…when Mahathir was PM.
    That is why Karpal asked Mahathir to repent for so many of his sins.

  10. #10 by Bigjoe on Monday, 13 June 2011 - 8:14 am

    Najib got a lot to be accountable for. This one here does not even sit in the top 10 or even 20.

    My guess is the biggest one Najib got to be accountable for is his plans for election to his own party. He seem to be insisting for it to happen BUT nothing is going his way. Why is he insisting when its all within his discretion when it happens? It appears he got some time-sensitive reason that only he knows to insist the election happen.

    NOW, he is up the creek because if the election does not happen, a lot of work and preparation has been put in by UMNO/BN grassroot will go to waste. He faces a demoralized and wasted machinery that will demand more from him when he has so little left to give.

    Najib got a lot to explain to but right now, its his own party he has a hard time explaining most basic of his job.

  11. #11 by sheriff singh on Monday, 13 June 2011 - 10:17 am

    If one Arab shareholder is replaced by another Arab shareholder, then its no big deal. Essentially status quo.

    However, one must note that Bank Negara has given the go-ahead for Maybank and CIMB to enter into talks with RHB Cap.

    This has another implication.

    Both of them could be negotiating to buy EPF’s 45% or so stake, the largest stake in RHB. If either one is successful in acquiring this stake, it will pave the way for a merger to create one of South East Asia’s largest banks.

    So a merger is still on the cards and looks likely to happen.

    EPF will most likely sell at a good price created by ADCB’s sale of its stake. It will then justify its entry into RHB and the banking sector many years ago when prodded to by the government and Bank Negara to save our ailing banks.

    Bank Negara and the government might come out looking good and justified in getting EPF involved many years ago. Further, EPF will look justified too if it walks away with a huge profit.

    Whichever party wins, look for the people who will walk away with lots of money.

  12. #12 by dagen on Monday, 13 June 2011 - 12:24 pm

    Maybank or cimb? Of course cimb. Look. Who is zee boss. This is all umno punya style.

  13. #13 by Jeffrey on Monday, 13 June 2011 - 12:37 pm

    Yes sometimes its true they ask a big institution like EPF or bank to take over a distressed bank to bail out losses – with govt direct help via BNM taking over bad loans in case of Commerce Asset taking over Bank Bumi & RHB taking over Sime Bank or indirect help via 1% soft loans in case of Maybank group taking over Supreme Finance. Whatever its probably not the case for present RHB proposed merger triggered more by ADCB wanting to square its 25% position and get out because of its own travails.

    Say what you like, when you buy a local bank whether for its profitability or bail out its losses, the acquirer probably know the position clearer – esp our local banking, borrower & legal culture – than often if it were to acquire foreign banks in a foreign place where bank’s risks are different.

  14. #14 by Jeffrey on Monday, 13 June 2011 - 12:39 pm

    Taking over a foreign bank incur unanticipated risks on acquirer’s part. Malaysia is still Ok under BN that’s why ADCB can exit with profit. Go to take over Philippine bank & you’d face both bank staff & borrowers thinking that since acquirer is from a better off country, it can ‘give chance’as if it’s a social duty of the richer to take care of poorer. In Thailand for eg the bank’ take their work/task leisurely. In 2009 Maybank spent 10.8 billion to acquire banks in Indonesia, Pakistan and Vietnam and incurred RM 2 billion losses in over a year. It least Maybank could blame the global financial crisis erupting after its acquisition. If you think Maybank hopeless why about Red Dot’s DBS taking over Thai Danu and ended making huge losses over S$1 billion and had to sell back to the Thais?

  15. #15 by k1980 on Monday, 13 June 2011 - 12:44 pm

    //merger between RHB Capital with (either) Maybank or CIMB Group to create Southeast Asia’s biggest bank//

    The name of the new bank should be_____.
    A. Bank C4 Malaysia
    B. Bank Jibby Malaysia
    C. Bank umno Malaysia
    D. Bank Satu Malaysia
    E. Bank Krupt Malaysia

  16. #16 by TheWrathOfGrapes on Monday, 13 June 2011 - 3:28 pm

    It is not so simple as to add the market cap of either RHB + CIMB or RHB + Maybank to get the combined market cap.

    If the market perceive the merger positively, the combined market cap can be greater than the sum of the individual market caps.

    However, if the market perceive the merger negatively, the combined market cap will be lower than the sum of the individual market caps.

    And, if history is any guide, the real reason for the merger may not be to reap synergies, but for vested interests. Then, the market will perceive it negatively and the combined entity will not even feature among the top 5 banks in the region.

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