Friday 02 Jun 2023
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KUALA LUMPUR (Sept 15): The possible divestment of major shareholders' stakes in AMMB Holdings Bhd and Alliance Financial Group Bhd’s (AFG), will benefit minority shareholders in both financial services entities.

According to CIMB Investment Bank Bhd, should Australia and New Zealand Banking Group Ltd (ANZ) and Singapore government investment vehicle Temasek Holdings sell their stakes in AMMB and AFG respectively, this will lead to a general offer for the AMMB and AFG shares.

ANZ owns 24% in AMMB while Temasek holds 14.8% in AFG.

“In the event that a stake is bought by a non-Malaysian banking entity at an acquisition price above the market price, this could bump up the target bank’s share price in the short term as it would reflect the bank’s higher intrinsic value,” said CIMB in a note today.

It noted, however, that the longer-term effect would depend on whether the new shareholder adds value to the bank.

CIMB had issued its note following a report by The Edge Malaysia weekly, citing industry observers, who said major shareholders of AMMB and AFG were willing to sell their stakes in the respective banking groups “if the price is right”.

“This came as a surprise to us because these parties view Malaysia as a key market for their regional portfolio of banking interests,” said CIMB.

CIMB said it did not see any strong rationale for any mergers and acquisitions (M&A) in AMMB and AFG due to difficulties in achieving revenue synergies, and operational overlap.

According to CIMB, it will be more difficult for bank acquisitions in the current environment to be earnings per share accretive, compared to three to four years ago. This is due to thinning net interest margins, which signify lower margins for the banking business.

Additionally, the higher capital requirements mean that the acquisitions would have to be mostly financed via costly issuance of equity capital.

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