Maybank ... Oct12

It is considering options to expand in Thailand including takeovers after raising RM3.66 billion (US$1.2 billion) in early Oct 2012 to boost its presence in Southeast Asia . Its intention is to have a full presence across all the 10 countries in Southeast Asia . Within that context, the idea of raising additional capital is meant to enable Maybank to grow a bit more aggressive in markets like Indonesia , the Philippines and later possibly into Singapore . However its CEO Abdul Wahid reiterated that proceeds from its Oct 8 2012 share sale are not meant for making a bid for Bank of Ayudhya Pcl in Thailand .

Although current (Oct 2012) news of Malayan Banking Bhd's (Maybank) merger and acquisition (M&A) aspirations seem to be focused on Thailand, some industry experts do not rule out that the banking giant may be casting its eye on targets closer to home. And one name that keeps cropping up as a potential merger target is RHB Capital Bhd.

Maybank is 45.77% owned by Permodalan Nasional Bhd (PNB), while the EPF owns 45.34% of RHB Capital. EPF also owns 10.94% of Maybank. PNB's stake in Maybank is valued at RM33.83bil while EPF's stake in RHB Capital is worth RM7.35bil.

The merger could be structured in such a way that will see both parties (PNB and EPF) lowering their stakes in the enlarged merged entity. This would bode well for the institutions as they are committed to lower down their stakes in the banks. The EPF is flush with money to fund the further growth on this strong merged entity. A merger with RHB Capital could potentially create the region's biggest bank, with assets surpassing that of Singapore 's DBS Group Holdings Ltd, South-East Asia 's largest lender.

However some reckon such a deal is unlikely to happen. Datuk Seri Abdul Wahid Omar (Maybank's chief executive officer) was quite firm that Maybank is no longer interested in RHB. Maybank was looking to expand regionally instead of in the domestic market. The banking industry in Malaysia is rather saturated and it's not exciting anymore. Furthermore, a merger between the two would cause many operational duplications, hence it would be hard to see a synergistic benefit from it, he said, adding that the timing of such a deal was also an issue.

There would be very little synergies reaped between both banks, as both are competing head on almost all fronts. A better proposition would be for Maybank to enter into an M&A in a regional market where the population base is bigger.

The idea of a Maybank-RHB merger isn't new. In 2011, Maybank and CIMB Group had won the central bank's approval to have separate merger talks with RHB Capital, triggering one of the hottest battles in the local banking scene when Abu Dhabi Commercial Bank, which held a 25% in RHB Capital, was looking to divest its holdings. Both banks didn't pursue the possible merger.

Meanwhile it plans to boost its presence in the Greater China region, its third most profitable overseas market, but has ruled out making any acquisitions there.  The group currently has three branches in the Greater China region - one each in Hong Kong, Shanghai and Beijing - and plans to eventually add more in other key cities in a bid to support robust trade and investment flows between China and Asean. There's no intention to do mergers and acquisitions in this region but think organic growth is appropriate.

Maybank's closest rival at home, CIMB Group, has a 19.9 per cent stake in Bank of Yingkou, a mid-sized lender based in northeast China, while Affin Holdings Bhd has a 23.5 per cent stake in Hong Kong-based Bank of East Asia.

The Greater China operations are currently (Oct 2012) the third largest overseas contributor to the Maybank group's profit before tax (PBT), after Singapore and Indonesia.