CIMB looks beyond Asean

PETALING JAYA: CIMB Group Holdings Bhd, which is in talks to buy parts of Royal Bank of Scotland's (RBS) businesses in Asia-Pacific, may be looking to strengthen its presence in countries outside Asean.

Analysts, who continued to speculate over the move given the little that CIMB group chief executive Datuk Seri Nazir Razak had revealed about the deal, said the strengthening the Asean-focused bank's presence outside the region was the most probable strategy.

Nazir had said that the deal would be concluded by the end of next month.

Analysts at Maybank Investment Bank Bhd and HwangDBS Vickers Research believed that the proposed acquisition would reinforce the bank's distribution channels given that the assets for sale were located in China, India and Hong Kong.

However, the bank's strategy could face obstacles even if the deal went through, as a Wall Street Journal blog pointed out early this month.

This is because bankers unfamiliar with CIMB may choose to leave since they may feel that the bank is a relative unknown to some of their clients.

CIMB, through its investment-banking arm, has presence in Hong Kong while the bank bought a 19.99% stake in China's Bank of Yingkou Co Ltd in 2008 via a subscription of 141.2 million shares worth RM156.2mil.

The analysts said it was hard to comment on how the deal would impact the bank since there was very little information on exactly what assets were being acquired.

“Other than to strengthen the bank's distribution channels, I can think of no other reason because we don't know at this point what is being acquired,” Maybank analyst Desmond Chng told StarBiz.

Despite speculation since early February, there has been just one terse announcement to the stock exchange on March 1 confirming that the bank had signed a memorandum of understanding for the proposed acquisition of certain of RBS' cash equities, equity capital markets and corporate finance businesses.

Besides the RBS deal, CIMB is also in talks with San Miguel Corp to buy a 60% stake in the Manila-based Bank of Commerce as well as seeking a banking licence in Laos.

Alliance Investment Bank Bhd analyst Cheah King Yoong, in an email reply, said it had always been CIMB's mid to long-term goal to expand its footprint outside Asean.

“Therefore this acquisition strategy is in line with the aspiration of the bank to be a regional champion, as per the objectives outlined in the government-linked company transformation programme,” he said, adding that this would broaden its reach to the rest of Asia.

Cheah noted that pricing continued to be the main issue for CIMB's regional acquisition strategy since every potential acquisition should be value-accretive to the shareholders over the longer-term period.

He said the deal would be a good tactical move, provided the acquisition price was right, for the bank to accelerate its regional expansion as this would add to its presence in Asean by providing value-added services outside the region besides an expanding market reach.