AmBank, RHB Bank fall after Moody’s report on proposed merger

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KUALA LUMPUR (June 8): Shares in AMMB Holdings Bhd (AmBank) and RHB Bank Bhd fell 1.02% and 0.96% respectively, after Moody's Investor Service opined the proposed merger plan is a credit positive for AmBank, but less for RHB.

At noon break, AmBank was five sen or 1.02% down to RM4.87, with 1.79 million shares traded, for a market capitalisation of RM14.83 billion.

RHB was down five sen or 0.96% at RM5.14, with 619,800 shares exchanging hands. It had a market capitalisation of RM20.73 billion.

According to Moody’s note today, potential benefits to RHB are discounted by its likely operating challenges to rationalise the organisational structure and infrastructure of the newly-merged entity.
Moody’s said RHB’s integration of OSK Investment Bank Group (unrated) and other mergers involving Malaysian banks, suggest significant challenges, with the realisation of revenue and cost synergies occurring many years after integration.
Moody’s said the revenue benefits will likely materialise only after the merged entity incurs substantial restructuring expenses.

Moody’s said AmBank’s funding profile is weaker than RHB, on a standalone credit basis.

AmBank has a materially smaller market share of domestic deposits and lower percentage of low-cost current and savings account deposits in its deposit mix, than RHB, Moody’s added.