Malaysia’s MBSB looks at possible merger during next two years

Image of MBSB's website.

Although the potential merger between Malaysia Building Society Bhd (MBSB) and Bank Islam Malaysia Bhd remains market talk, MBSB recently confirmed that a merger with an Islamic financial institution is still on the cards, within this year or next.

Local media reported that MBSB president and chief executive officer Ahmad Zaini Othman 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.

This aspiration is renewed, as the three-way mega merger with CIMB Group Holdings Bhd and RHB Capital Bhd that would have seen MBSB acquired by the two banks’ Islamic banking operations fell through.

However, Zaini noted that MBSB is not actively in talks with any financial institutions on any merger or acquisition at the moment, according to The Edge Financial Daily.

“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 told reporters last week after MBSB held its annual general meeting.

He said the critical work was in closing the gap in the operations to be in line with 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 of MBSB’s effort to get recognition as a financial institution.

Any form of corporate exercise involving financial institutions, 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.”

In February, The Star reported that the idea of a merger between both lenders was mooted at the shareholder level of both companies, namely the Employees Provident Fund (EPF) and Lembaga Tabung Haji (LTH), according to sources.

“A common factor the two companies have is Samsudin Osman, who is chairman of EPF and BIMB Holdings Bhd – Bank Islam’s listed parent company. BIMB wholly owns Bank Islam, which is its main income generator,” it had reported.

“Because of their common chairman, the two parties have a close relationship,” said sources.

Zaini had also said in an interview with StarBizWeek that for the company to get out of its status as a non-banking institution and to work towards a financial institution platform, it needs to seriously look into a corporate exercise in the very near future.

Zaini had said that it would have to be a marriage between retail and corporate, given that he felt MBSB can contribute more on the latter.

On the other hand, Bank Islam’s managing director Zukri Samat said last year that the bank was open to merger and acquisition candidates that can complement its strengths in consumer banking.

Zaini 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 last week.

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 per cent this year compared with 3 per cent last year, attributed to the “distraction” caused by the mega merger as the company was unable to implement certain strategies.

Also Read: CIMB-RHB-MBSB: mega merger aborted?

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In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

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  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.