Banks Consolidation -- then Nationalisation?

The swift and unexpected greenlight given to the EPF -- Employees Provident Fund -- is something providential in the arrested direction the local bank was first headed -- to Kuwait via Kuwaiti Finance House. Second suitor EONCapital joined the race after it became a free-for-all but before it could even put one leg into the bank's door, EPF entered the boardroom and at lightning sppeed, took over.

This begs the question -- are the several million members of EPF who are the actual stakeholders in an companies EPF invests in going to reap benefits from this latest acquisition?

Desi will come back to study this latest development, but meanwhile thinking aloud: is thiis a veiled nationalisation of a bank via the EPF? A worrisome trend if it is because this People's Savings Institution does not have the expertise to be running a banking business fulltime. Hope it won't make any denton next year's dividend payout...

From The Star,
Saturday March 10, 2007


Clearer direction for RHB Cap with EPF in control



PETALING JAYA: By having the Employees Provident Fund (EPF) as its single largest shareholder, RHB Capital Bhd (RHB Cap), which owns a 70% stake in RHB Bank, will be able to move forward in a clearer direction.

Also, EPF's strong financial muscle would be able to help RHB Cap re-finance its huge borrowing at a lower cost and that would benefit its future earnings, analysts said.

The disagreement between two major shareholders, namely Utama Banking Group Bhd (UBG) and EPF, was one of the factors that had hindered the growth of the RHB banking group in the past years.

With UBG selling its stake in Rashid Hussain Bhd (RHB) to EPF, the pension fund would have full control of the banking group after its general offer to RHB Cap.

So, EPF could set the future direction for the group now, said analysts.

“The acquisition by EPF in RHB group will help to provide stability in the group, in terms of strategic planning.

“And, hopefully, there will be transparency on the group as well,” said M&A Securities head of research Wee Kim Hong.

Speaking at a press conference yesterday, EPF chief executive officer Datuk Azlan Zainol said its acquisition would “at long last provide stability at RHB group, which had seen issues on ownership in the past.”

He said the pension fund would not “interfere” in the operations of RHB but would ensure check and balance in the organisation, such as corporate governance and transparency for the benefit of all shareholders.

The RHB group had a good board of directors and EPF would “strengthen it with perhaps two or three more who have a strong background in banking and investment,” he added.

Debts, which have incurred high interest expenses, are an issue to the RHB group's financial health.

“EPF is expected to be able to restructure RHB Cap's borrowings at lower interest rate. That will help boost its future earnings when interest expenses fall,” said OSK Research banking analyst Chan Ken Yew.

Chan noted that RHB Bank was profitable, although its profits might not be as good as those of its peers like Public Bank Bhd and CIMB Bank Bhd. However, heavy interest expenses had weighed down RHB Bank's earnings, he added.

“The restructuring of the group's borrowings will be an immediate benefit for RHB Cap having EPF as its shareholder,” said Chan.

RHB Cap recently announced a 73% jump in net profit to RM123.7mil for its fourth quarter ended Dec 31.

Looking further ahead, EPF will eventually bring at least one strategic partner into the RHB group.

Azlan reiterated that EPF would look for a partner that could “create value” to the banking group. And he did not rule out the possibility of having Kuwait Finance House (KFH) as that partner.

Analysts said bringing foreign strategic partners would be positive for the RHB group.

“If KFH were one of them, it will help grow the group's Islamic banking assets. With liberalisation gaining pace, the group does need partners who could improve its competitiveness,” said OSK Research's Chan.


RHB : [Stock Watch] [News]

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