Slight setback for CIMB after India exclusion (1023)

KUALA LUMPUR: OSK Research views the Royal Bank of Scotland's (RBS) move to exclude its India operations in the sale of its Asia Pacific businesses as a slight setback to CIMB Group.

The research house said on Friday that RBS' business in India was one of the countries with the least duplication with CIMB excluding RBS' regional presence.

"Outside Asean, where CIMB's core strength naturally lies, RBS India is also the second strongest market after Australia within RBS' ex-ASEAN cash equities and M&A portfolio, ranking top 10 in terms of mergers and advisory market share," said the research house.

However, OSK Research said it was maintaining its BUY recommendation and leaving its fair value unchanged at RM8.53 (2.3 times price to book value, 16.7% returns on equity) as the impact of excluding RBS' India business was relatively small vis-vis the group's overall earnings and asset base.

On Thursday, CIMB Group announced RBS had excluded its India operations from an earlier sale and purchase agreement for various Asia Pacific cash equities and associated investment banking businesses. The reason was due to an unexpected legal issue arising with the sale of the Indian businesses by RBS.

To recap, CIMB's agreement to acquire most of the Asia Pacific cash equities and associated investment banking businesses of RBS was announced on April 2 at an initial cost of 173.9mil pound sterling (RM849.4mil).

Without the Indian portion, the total acquisition cost will be reduced to around 160mil pound sterling (RM781mil).