Malaysia's top funds say banking sector ripe for consolidation

MALAYSIA’S crowded banking sector can benefit from mergers and acquisitions, executives from the country’s top investment funds told a conference on Monday (Aug 15), seeing opportunities to cut costs and compete with new entrants into the industry.

“There are benefits for further consolidation,” Rick Ramli, Permodalan Nasional Bhd’s (PNB) chief investment officer for private and strategic investments, told a conference organised by stock exchange operator Bursa Malaysia and Malayan Banking Bhd (Maybank).

“There are still sub-scale banks, as you think about higher compliance costs (and) non-traditional competition, you do need to invest and scale up,” Rick said, also noting investments were needed in core systems and technology to upgrade to digital platforms.

The comments come as Malaysia’s banking industry is set to get yet more competitive, following the issuance of 5 digital banking licences by the central bank at the end of April.

Citing sources, Reuters reported last week that Malaysia’s second-richest man Quek Leng Chan is weighing options for his stake in Hong Leong Bank, including a merger.

Amir Hamzah Azizan, chief executive at the Employees Provident Fund (EPF), said Malaysia’s banking sector had about 26 firms, with the top 5 lenders commanding a combined market share of about 48 per cent.

“It is probably a segment that is probably due for some form of reconsolidation,” he said.

Sovereign wealth fund Khazanah Nasional managing director Amirul Feisal Wan Zahir also said consolidation was logical, but it depended on timing and pricing.

“It makes a lot of sense for people to merge and we ... see various permutations of that happening,” he said.

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EPF is the top shareholder in RHB Bank Bhd with a 42.1 per cent stake, besides holding minority stakes in other lenders including Hong Leong Bank and Public Bank Bhd, Refinitiv data indicates.

PNB is the top shareholder in Maybank, the country’s largest bank, with a 46.6 per cent stake, while Khazanah is the biggest shareholder of second-ranked lender CIMB Group Holdings Bhd, with a 24.8 per cent stake. REUTERS