RHB Bank and AmBank merger
Nov 7th, 2007 by Neo
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Malaysia is perhaps the only country in the world where we have a bank named after a person. Neo Bank? Not quite… I am referring to RHB Bank, the legacy of Tan Sri Rashid Hussain, a familiar icon in Malaysian financial services during the 1980s and 1990s. Tan Sri Rashid even has a Wikipedia listing at http://en.wikipedia.org/wiki/Rashid_Hussain, so does myself. I am sure you know where to look for mine. 
RHB today is in a somewhat sorry state. Following the financial crisis in 1997-98 the group was crippled and found that it took too big a bite by consuming Sime Bank among other things. After a round of mergers and restructuring which saw the entry of powerful Sarawakians as major shareholders, one would have thought the bank can stabilize and get back to business and make money for shareholders.
As we continue to see, this is far from the case. Following the big hiccups, EPF is now desperately trying to hawk out bits and pieces of RHB. There are talks that the Islamic Banking operations may go to Kuwait Finance House (KFH), and more recently there are rumors of merger negotiations between RHB and AMMB. Both groups have since denied such rumors.
For those of you who are familiar with Mid Valley Megamall, you will know that there are 2 ATM machines outside MPH area - one is Maybank and the other is RHB. A familiar sight is the long queue of users for the Maybank ATM, while the RHB machine would look pathetically quiet. The same sight appears in the basement of Low Yat. I for one find it a nuisance if I need to bank in cheques into RHB accounts because it is so hard to find a branch compared to Maybank.
OK coming back to the main issue, what does it mean if RHB & AmBank gets together? Well it would make it easier for me to bank in cheques to RHB accounts. But selfish reasons aside, here are the implications:
- The banking industry in Malaysia inches one step closer to oligopoly and we will end up like Australia which has 4 big banks and a handful of regional ones. Higher fees will be inevitable.
- AmBank’s major shareholder, ANZ Bank, would have an even bigger vehicle to launch into South East Asia. But they will also inherit the RHB legacies/problems.
- Big local banks – Maybank, CIMB, Public will dominate the market and become better in what they do. Like Australia, foreign banks have little chance to compete. They will have to satisfy with leftovers.
- ANZ will make RHB take a big asset write-down like what they did with AMMB recently. From then on, the only way for profits is up, up and away. Finally RHB gets the life it deserves.
- RM70 million would be blown away in unproductive re-branding & advertising, if the BCB to CIMB Bank metamorphosis is anything to go by.
What do you have to add to the implications list?
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Well that is awesome! Here in Australia, we never do that. Streets and roads can probably be named after a person, leader or national hero, but not banks.
$70mil seems to be the going rate for wasting the public’s money… just take a look at Malaysia angkasawan program. Enough to feed thousands of World Vision kids for 10 years.
If such a merger happens, surely there would be massive job losses as well. The CEO would give himself a swag of options, ramp up profits and cash out.
Ohhhh…. good news haa… 2 bank want to merge.
AmBank & RHB merger is an unlikely scenario coz AmBank did a book cleaning excercise recently… should be ready for a round of profit growth in the next couple of years. In contrast I think RHB is still hiding a lot of bad loans and is overvalued relative to AMMB. A more likely excercise would involve moves by EON Bank, Alliance and CIMB Bank.
I guess another implication is that some of the lucky lawyers in town will definitely make a fortune out of this as you know how much is the legal fees for this kind of merger exercise? definitely not less then 6 figures…
So from this aspect means more bank mergers mean more job opportunities….
AMMB will not merge with RHB.