AMMB Holdings Bhd (or AmBank Group) and RHB Bank Berhad (or RHB Bank) today announced that they would not proceed with the proposed merger as both parties have mutually agreed to end the negotiations on it. The financial institutions were not able to reach an agreement on mutually acceptable terms and conditions despite all deliberation and negotiations.
As such, the Exclusivity Period pursuant to the Exclusivity Agreement between the two Malaysian banks dated 1 June 2017 will lapse with immediate effect.
"With this decision, we will continue to execute our initiatives under our current strategy to create value for our shareholders, and focus on delivering superior customer experience," said RHB group managing director Khairussaleh Ramli in a joined press release.
"Our Group's strategy and direction remains the same as we aspire to deliver on our Group Top Four growth aspirations," added AmBank group chief executive officer Sulaiman Mohd Tahir.
Prior to the negotiation talks, Khairussaleh was confident that if the proposed merger takes place, it will create synergy for the enlarged banking group, benefitting their shareholders, customers, employees and all other stakeholders. Sulaiman was equally positive as he believed their combined strength in retail and investment banking will bode well as they move forward to achieve their goal of becoming a formidable banking group.
When asked on the benefits of the merger, Malaysia’s Kenanga Investment Bank Bhd equity research vice-president Ahmad Ramzani Ramli said both banking groups are expected to benefit out of the merger as it would enable them to capitalise on each other’s strength. “AmBank has an established domestic reach while RHB has a wider presence in the ASEAN market instead. So, the merger will make sense for both financial institutions. AmBank‘s loan growth, for example, is small, so this gives an opportunity for the bank to widen its loan growth capacity when the merge happens,” Ahmad Ramzani told The ASEAN Post.
“You can’t quantify the impact of the merger on the local banking industry. The pool is getting smaller and the margins will be compressed. In a way, it will be benefiting the banks to have the capacity to venture into overseas markets,” he explained further.
Both the banking groups suspended the trading of their securities with effect from 9am today. All structured warrants relating to RHB and AmBank was also suspended. Yesterday, RHB Bank shares declined seven sen to close at RM4.88 per share while AMMB’s shares closed unchanged at RM4.70.
On June 1, both AmBank and RHB received approval from Bank Negara Malaysia to commence negotiations for a possible merger of their businesses and undertakings. The approvals were valid until November 30, 2017. It was envisaged that the transaction will effectively be an all shares merger. RHB is the fourth-largest while AmBank is the sixth-largest lender based on asset size. If the merger had materialised, the banking group would have become the fourth-largest bank in Malaysia.
The trading of both the banks' shares and structured warrants will resume with effect from 9am (local time) tomorrow.