Maybank, CIMB positive on BI ruling

by **hlk** Thu 19 Jul 2012, 19:16

KUALA LUMPUR: Share prices of Maybank and CIMB are likely to react positively to news that Bank Indonesia will make exceptions
for
higher ownership levels in local banks if owners are listed banks in
great strong financial shape, such as having Tier 1 capital above 6.0
per cent.

The exemptions follow the widely-expected ruling by
Indonesia's central bank on single ownership limit for local banks at a
maximum 40 per cent, but this is only for new acquisitions, OSK
Investment Banking said in an investment research note.

Existing
banks would be exempted if they meet Bank Indonesia (BI)'s minimum
corporate governance and financial health thresholds.

As such,
it appears that this new ruling may not be retroactive and provide
rational exceptions to the rule if existing banks meet the stipulated
exceptions set by BI.

Maybank traded one sen higher at RM8.78 on Bursa Malaysia as at 12.30 pm while CIMB eased two sen to RM7.88.

BI
has stated that it would make exceptions to the rule in that banks can
appeal to have ownership above the 40 per cent cap if the owners of the
banks are, publicly listed, the owning bank has a Tier 1 capital ratio
of more than 6.0 per cent and also meet the two highest standards of
corporate governance.

In this respect, both CIMB and Maybank -
which currently hold 97.9 per cent equity interest in CIMB Niaga and 97
per cent in BII (Bank Internasional Indonesia), respectively - would
have met the stipulated requirements.

This would allow the two banking groups to appeal for a shareholding above the stipulated 40 per cent cap.

"Banks that do not meet the ruling will have to sell off at least 20 per cent of their stake within five years," OSK said.

"Although
the latest announcement by BI is not entirely clear on certain aspects,
we believe that the share prices of Maybank and CIMB are likely to
react positively to the news as both banks are very likely to meet the
minimum thresholds stipulated to get exemption from having to sell down
their respective stakes in BII and CIMB Niaga," OSK said.

Most
importantly, it does seem that the new ruling was not retroactive as
long as the banks meet the minimum exemption requirements, said OSK. --
BERNAMA