KUALA LUMPUR: Malaysian Industrial Development Finance Bhd (MIDF) is on the lookout for merger and acquisition (M&A) targets in the next 18 to 24 months, as the company seeks an entry into the retail banking segment.

According to MIDF group managing director Datuk Mohd Najib Abdullah the group is assessing opportunities and expects to make a decision within the next 18 to 24 months.

He added that MIDF is looking at both local and foreign institutions, but declined to reveal details.

“At the end of the day, it’s about the valuation. [In] the market now, there is a lot of demand for additional capital for the banks. A lot of the big banks are already doing their capital programme.

“The banking sector will demand a lot of capital requirement. It could mean new investors coming in or they could invite new shareholders to come in,” he told reporters on the sidelines of MIDF’s media luncheon yesterday.

Asked if MIDF is already in talks with any of these potential targets, Mohd Najib said the group cannot initiate talks as it has yet to obtain the approval of Bank Negara Malaysia (BNM).

He noted that MIDF had previously considered Asian Finance Bank (AFB), but had since discounted the bank as a potential target, due to unfavourable valuation.

“In AFB, there are four different and distinct shareholders. We took a look at AFB and felt that — from our investment perspective — it wouldn’t be fair to us. We are not considering AFB anymore,” he said.

AFB is one of three foreign banks — the others being Kuwait Finance House (M) Bhd and Saudi Arabia’s Al Rajhi Banking & Investment Corp (M) Bhd — that BNM gave an Islamic banking licence to in the mid-2000s.

Among the local banks, major shareholders of AMMB Holdings Bhd, which owns AmBank Bhd, and Bank Muamalat are known to be seeking suitors.

AMMB Holdings’ major shareholder Australia and New Zealand Banking Group Ltd was previously reported as considering the sale of its 23.78% stake in the banking group.

Meanwhile, DRB-Hicom Bhd is also looking for buyer for part of its 70% stake in Bank Muamalat. The conglomerate intends to pare down its stake in the bank from 70% to 40%.

Over at Malaysia Building Society Bhd, it is said that the group is still searching for merger partner after the previous merger plans fell through.

Commenting on the local equities market, Mohd Najib said MIDF expects the market to do better this year, with a year-end FBM KLCI target of 1,850 — versus 2016’s closing of around 1,640 points — driven by better corporate performance.

He said initial public offering (IPO) activities will be higher this year.

“I think we will have a better year this year. There were a lot of uncertainties last year and I think some of these uncertainties will be resolved in the early part of this year.

“The IPO market will be more active this year, as we have got a lot more mandates this year. We do have a couple of IPOs lined up,” he said.