This article first appeared in The Edge Financial Daily on June 23, 2017

KUALA LUMPUR: Permodalan Nasional Bhd’s (PNB) consolidated net income rose in the first five months of 2017 to RM6.75 billion, up 18.2% compared with RM5.71 billion in the same period of 2016, while its assets under management grew 4.1% to RM265.6 billion from RM255.18 billion.

The strong performance pushed up the fund management group’s return-on-assets to 6.2%, from 5.5% between January and May 2016.

Its group chairman Tan Sri Abdul Wahid Omar said the performance was a reflection of improved economic and capital markets locally and abroad.

“With the Malaysian economy expected to register higher growth, supported by stronger exports and firmer currency, we hope to continue to sustain this respectable performance growth for the rest of the year,” he told reporters during a briefing on PNB’s year-to-date (YTD) performance yesterday.

Referring to PNB’s 2017-2022 strategic plan, Abdul Wahid said the group had achieved notable milestones, with the aggregate market value rising by RM31 billion YTD, representing a weighted growth of 18.8%, which outperformed the growth of the local equity market benchmark by more than double.

“The demerger of PNB strategic companies such as Sime Darby Bhd and UMW Holdings Bhd is progressing well, while S P Setia Bhd’s proposed acquisition of I&P Bhd has also been recently finalised,” he said.

However, Abdul Wahid declined to comment on the prospects of Malaysian Industrial Development Finance Bhd, saying that “something exciting” will be announced soon.

On the proposed merger between RHB Bank Bhd and AMMB Holdings Bhd, Abdul Wahid said it is “timely” considering the current valuation of the two groups, pegged at one-time the book value.

“Given that the valuation is about one-time book value, it is probably the right time to do a merger,” he said.

Early this month, Bank Negara Malaysia gave approval to the two groups to commence merger talks which, if successful, will create the country’s fourth-largest banking entity by assets, after Malayan Banking Bhd, CIMB Group Holdings Bhd and Public Bank Bhd.

“If you look at the sizes of these two entities, they are quite comparable. The challenge is how the merged entity will be able to manage the duplication in terms of resources, which include branch network, people and systems,” he said.

Abdul Wahid added, however, that the merger “is not going to be easy for them”.

RHB Bank currently has 215 branches while AMMB operates 176 branches, giving a total of 391 branches with a combined workforce of 23,000.

The merged entity, according to S&P Global Market Intelligence, is expected to have a pro forma asset size of RM368.29 billion.

RHB Bank is currently the country’s fourth-largest bank, while AMMB is the sixth largest.

According to PNB’s 2016 annual report, the fund through AmanahRaya Trustees Bhd owned a 4.46% stake in AMMB — 2.3% via Amanah Saham Bumiputera (ASB) and 2.16% via Amanah Saham Wawasan 2020 (ASW 2020).

In RHB Bank, PNB owned a 4.69% stake via ASB and a 1.88% stake via ASW 2020.

Abdul Wahid said PNB’s unit trust subsidiary Amanah Saham Nasional Bhd now has more than 13 million accounts, with almost 217 billion units in circulation.

Yesterday, PNB announced the income distribution for two of the unit trusts: the fixed-price Amanah Saham Didik (ASD) and the variable-priced Amanah Saham Nasional 2 (ASN2).

“ASD unitholders will receive an income distribution of six sen per unit, while ASN2 account holders will receive an income distribution of 3.1 sen per unit,” he said.