This article first appeared in The Edge Financial Daily, on October 2, 2015.

KUALA LUMPUR: Malaysia Building Society Bhd (MBSB) said it will commence merger talks with Bank Muamalat Malaysia Bhd’s shareholders — Khazanah Nasional Bhd and DRB-Hicom Bhd — in relation to the proposed merger between the two financial institutions.

In a filing with Bursa Malaysia yesterday, MBSB said Bank Negara Malaysia (BNM) has no objection in principle for MBSB to commence negotiations with Bank Muamalat’s shareholders.

DRB-Hicom holds a 70% equity stake in the Islamic bank while Khazanah has a 30% stake.

“BNM informed us [about the negotiations] via a letter dated Sept 30,” said MBSB, adding that the central bank requested the negotiations be completed within three months from the date of the letter.

It said Citigroup Global Markets Ltd and AmInvestment Bank Bhd will act as advisers for MBSB in the proposed merger.

MBSB said further details on the proposed merger will be announced in due course.

Should the talks proceed, it will pave the way for MBSB to obtain its full-fledged Islamic banking licence.

MBSB, which is hard hit by a hefty loan loss provision due to its kitchen sinking exercise, was part of a proposed tripartite merger with CIMB Group Holdings Bhd and RHB Capital Bhd, that was aborted in January, with the parties citing unfavourable economic conditions as the reason.

MBSB’s share price has fallen since November last year, from RM2.60 to RM1.30 late last month. The stock gained five sen to RM1.51 yesterday, for a market value of RM4.34 billion.