Relaxed foreign equity rules may spur M&A interest in smaller Malaysian banks

New Straits Times

16 hours ago

KUALA LUMPUR: Smaller Malaysian banks could be potential targets if the government relaxes its rules on foreign equity ownership in strategic sectors incuding financial services, analysts said.
They named the likes of Alliance Bank Bhd, AMMB Holdings Bhd, MBSB Bank Bhd and Affin Bank Bhd that could attract interest from foreign players.
MBSB Investment Banking Bhd (MBSB IB) said regional players from Singapore and China with a deeper strategic stake in Malaysia would likely be keener than the Western peers.
MBSB IB noted that Western institutions, including Citibank and Standard Chartered, had recently withdrawn from the Asean region, citing intense competition as the main reason.
Players from Singapore could be among the suitors due to the republic's geographical proximity, and deeper ties with Malaysia, while China has been forging strategic partnership with Asean as of late.
MBSB IB said AMMB has long been viewed as a potential candidate for mergers and acquisitions, given its modest size and the fundamental improvements it has made in recent years.
This is further supported by speculation that its major shareholder and founder Tan Sri Azman Hashim may be open to selling part of his stake if the valuation is favourable
"In the case of Affin, Bank of East Asia is said to have been looking to dispose of its holdings for quite some time," it added.
Malaysia reportedly was considering easing foreign ownership limits in strategic industries, including the banking and power sectors, as part of efforts to reduce the 25 per cent US tariff on the country's goods.
Currently, Malaysia imposes a 30 per cent cap on foreign ownership in commercial banks, while foreign equity in investment and Islamic banks is limited to 70 per cent.
Affin Hwang Investment Bank said any liberalisation in rules will have to be open to all foreign entities and not just US companies although it relates to negotiations on US tariff on Malaysian goods.
"We gather that DBS is interested to acquire a controlling stake in Alliance Bank, and the possible easing of foreign shareholding limits in local banks will be positive for the banking group, given the potential entry of a strong strategic shareholder.
"Public Bank Bhd could also see M&A interest from foreign entities and helo clear the current share overhang due to the majopr shareholders' plan reduce their stake," Affin Hwang added.