MBSB: Possible merger within this or next year

KUALA LUMPUR (April 16): While keeping mum on speculation about a merger between Malaysia Building Society Bhd (MBSB) and Bank Islam Malaysia Bhd, MBSB president and chief executive officer Datuk Ahmad Zaini Othman said a merger with an Islamic financial institution is still on the cards, possibly within this or next year.  

Under the aborted three-way merger plan with CIMB Group Holdings Bhd and RHB Capital Bhd, MBSB would have been acquired by the two banks’ Islamic banking operations to become a “mega” Islamic bank.

At a press conference after the MBSB’s annual general meeting yesterday, Ahmad Zaini reiterated the group’s aspiration to be an Islamic financial institution and with that, the need for it to merge with an Islamic financial entity.

However, Ahmad Zaini noted that MBSB is currently not actively in talks with any financial institutions on any sort of merger or acquisition.

“This kind of thing requires a little bit more study and analysis. But it doesn’t mean that we need to talk to financial institutions to be able to go into that kind of platform.

“We are looking and studying the basis first and get our shareholders to basically think through and they will evaluate and say which is the best decision and we will take it from there,” he said.

When asked about a probable timeline for a possible merger, Ahmad Zaini said: “As far as timeline [is concerned], it could be this year or maybe next year.

“But the criticalness of it is that we need to close our gap first. Once we are able to close our gap then I think the timeline will fall in place.

“This closing of the gap where all operations must be in line with the thinking of the authorities and the regulatory framework of the central bank. Right now MBSB is not governed by the central bank, and for the last two years we have ... put in place policies, procedures and requirements to be more like a bank so that when we do it becomes easier,” he said.

Any form of corporate exercise involving financial institutions, Ahmad Zaini said, must get the blessing of Bank Negara Malaysia.

“But this is something in the future, we don’t know yet and it’s really up to the shareholders to push and talk to the relevant authorities.”

He also noted that MBSB has the capabilities to be granted its own banking licence, but this may take a longer journey for it to grow organically into a full-fledged bank.

“But as far as management is concerned, we are looking to strengthen our business model, our readiness and closing of the gaps,” he said.

The conversion of MBSB into an Islamic financial institution falls within a five-year plan which was drafted by the company years ago. It recently reactivated this aim after the mega merger fell through.

Meanwhile, MBSB is hoping to see loan growth of 8% this year compared with 3% last year.

“I think the dynamics of the environment are a bit of a challenge but what we intend to do is look at the quality of the loan growth rather than just an outright growth. So we are putting more emphasis on our risk management framework and those kinds of things,” he said.

He added that the 3% loan growth last year was due to “distraction” caused by the mega merger as the company was unable to implement certain strategies.

This article first appeared in The Edge Financial Daily, on April 16, 2015.

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