Merger of Malaysia lenders poses risks: Fitch

FITCH Ratings yesterday warned that a proposed merger between CIMB Group, RHB Capital and non-bank lender Malaysia Building Society (MBSB) posed challenges and risks for the new group amid a complex integration process.

On Thursday, the three listed entities issued a media statement saying that they had received approval from the central bank to commence discussions with the aim of merging the businesses of RHB and CIMB as well as creating an enlarged Islamic banking franchise with MBSB. To this end, the three had entered into a 90-day exclusivity agreement to negotiate and finalise pricing, structure and other relevant terms and conditions for the proposed merger.

If it pans out, the merger would create the largest bank in Malaysia and the fourth-largest lender in South-east Asia, with total assets of US$194 billion and a 23 per cent share of domestic loans compared to Maybank's 18 per cent. The resulting scale could also present synergies at a time when growth prospects in the Malaysian financial system are under pressure owing to high leverage.