Watch the banking mergers and acquisitions space

MERGERS and acquisitions (M&As) in Malaysia's banking scenario
are always an interesting watch due to the size of the transactions and
the famous shareholders involved. And every now and then, a mega
M&A banking deal will appear.
The most recent is Affin Holdings Bhd's exploration of a possible acquisition of a stake in Bank Muamalat Malaysia Bhd.
Another closely-watched candidate for a banking M&A deal is Alliance Bank Bhd, owned by the listed Alliance Financial Group Bhd (AFG).
What's clear is that Singapore's DBS Bank Ltd is seeking to penetrate the Malaysian market after Bank Negara
had given it the go-ahead in April to begin negotiations with a Temasek
unit for an effective 14.2% equity in AFG. Speculation is also rife
that upon buying out Temasek's 49% stake in Vertical Theme Sdn Bhd
(the unit that owns a strong 29% in AFG), DBS will then seek to buy out
the other shareholder, thereby gaining full control over this 29% block
in AFG.
Pro-competition and free market proponents would welcome the entry of DBS into Malaysia.
DBS,
which declares itself the largest bank in South-East Asia by assets,
would surely be able to offer attractive products and services to the
Malaysian consumers.
Increased competition as we all know, works out best for the consumers.
But in examining this scenario, one should take cognisance of a development across the causeway in the banking space.
Recently,
the Monetary Authority of Singapore said it would be granting two
full-fledged licences in the city state to two Chinese banks.
The Qualifying Full Bank (QFB) licences will be issued to two Chinese banks already operating in Singapore.
However,
what is noteworthy is that this has taken place amidst a long-standing
application for a full-fledged banking licence in Singapore by
Malaysia's CIMB Group Holdings Bhd.
That being the case, should Malaysia allow the gigantic DBS group to so easily penetrate the domestic market?
Instead,
there are those who reckon that the regulatory authorities could be
more inclined to “encourage” a domestic-driven merger involving AFG, in
other words, get AFG swallowed by a local bank.
That move makes
sense from the standpoint of encouraging local banking consolidation in
the interest of producing stronger local banks that are more able to
handle increasing competition.
But the issue is, how will such a move be “encouraged” and more importantly, will it fly in the face of a free market?
Admittedly,
all this “scenario forecasting” is highly speculative. But it does lead
us to one conclusion: watch this space as a deal involving AFG is fast
brewing and may take an unexpected turn.

Business
news editor Risen Jayaseelan wonders if private equity players will
ever be allowed into the Malaysian banking scene again, after the
fiasco involving EON Capital Bhd.