How should we judge a government?

In Malaysia, if you don't watch television or read newspapers, you are uninformed; but if you do, you are misinformed!

"If you're not careful, the newspapers will have you hating the people who are being oppressed, and loving the people who are doing the oppressing." - Malcolm X

Never argue with stupid people, they will drag you down to their level and then beat you with experience - Mark Twain

Why we should be against censorship in a court of law: Publicity is the very soul of justice … it keeps the judge himself, while trying, under trial. - Jeremy Bentham

"Our government is like a baby's alimentary canal, with a happy appetite at one end and no
responsibility at the other. " - Ronald Reagan

Government fed by the people

Government fed by the people

Career options

Career options
I suggest government... because nobody has ever been caught.

Corruption so prevalent it affects English language?

Corruption so prevalent it affects English language?
Corruption is so prevalent it affects English language?

When there's too much dirt...

When there's too much dirt...
We need better tools... to cover up mega corruptions.

Prevent bullying now!

Prevent bullying now!
If you're not going to speak up, how is the world supposed to know you exist? “Orang boleh pandai setinggi langit, tapi selama ia tidak menulis, ia akan hilang di dalam masyarakat dan dari sejarah.” - Ananta Prameodya Toer (Your intellect may soar to the sky but if you do not write, you will be lost from society and to history.)

Thursday, July 24, 2014

CIMB-RHB-MBSB Merger - a prelude to taking over Public Bank?

The song 'He ain't heavy... he's my brother...' comes to mind, even if its original meaning in the lyrics bears no semblance to this topic on banks in Malaysia.

Our PM's brother, Nazir has come a long way since gaining control of CIMB, after a merger with Bumiputra Commerce, which saw the latter losing its identity. Soon, there was an 'enforced' takeover of Southern Bank. How could it not be enforced when Bank Negara sided him which made it impossible to consider other suitors! Initially, there were reports that Lim Goh Tong's daughter (wife of Southern Bank's CEO) wanted to fight off the takeover. But even if we leave out political connections, despite having financial capacity to put up a fight, I think they were reminded where Uncle Lim made his pile in the first place.

There was no doubt CIMB had grown much under Nazir, but how much was due to his ability and how much due to his PM brother's clout seems pretty obvious. Most of the mega mergers (probably initiated by CIMB) were handled by CIMB.

Just before the latest proposed merger, Nazir resigned as CEO of CIMB to become Chairman, and was appointed a director of Khazanah! How convenient indeed to help facilitate the merger. That he said the deal won't go through if there was risk seems meaningless under the circumstances.

Anyway, Financetwitter.com has a wonderful story on our banks...

CIMB-RHB-MBSB Mega Merger – The Danger Of Creating A "Too-Big-To-Fail" Biggest Bank

Excerpt:

'But why the needs to create such a mega-merger now? It was not like either CIMB, RHB or MBSB were in bad shape that they need a bail-out. Considering Malaysia’s population of merely 30 million, how small is the number of banks that can be considered strong and healthy? The country had merged its 54 banks prior to 1997-1998 Financial Crisis to the present 9 banks. Is this not an ideal figure?
Surely it wasn’t done in the interest of the minority shareholders. The fact that Bank Negara (Central Bank) gave the three financial institutions approval in less than 24 hours after they wrote to it is a sure sign that it is in favour of the merger. But the fact that the authority agrees to the 90-day exclusive clause agreement also shows that minority shareholders are not getting any better deal from other interested parties.

The lame excuses given – RHB is not being sold and to minimize disruptions. Was this a pre-planned move to fulfill PM Najib’s dream to install his brother as the supremo of the largest bank in the country? Or was it to simply fulfill Bank Negara governor Zeti’s ego to establish a mega Islamic bank with a capitalization of US$1 billion (RM3.2 billion) as her trademark, before her contract expires in 2016?

Coincidently, Public Bank surprised the market when it proposed a RM5 billion rights issue 2-months ago, deliberately “over capitalising” it in terms of its capital requirements for Basel III. With paid up capital of over 3.88 billion shares, market capitalization of RM77.95 billion, price-to-book valuation of 3.4 times, Public Bank is now the most expensive bank to be acquired.

So, did 84-year-old Teh Hong Piow, who owns 24.08% of Public Bank, actually knew something was cooking in CIMB, so much so that he didn’t blink his eyes about pumping RM1.2 billion of his own money for the rights issue exercise? Did CIMB plans to acquire Public Bank instead in the first place? Perhaps it was both – to acquire RHB and MBSB, together with Public Bank. If it’s true, then Teh Hong Piow has save the bank he founded some 48 years ago from a “force merger”, at least for now.
One has to remember that CIMB was the result of a merger between CIMB, Bumiputra-Commerce Bank and Southern Bank Bhd in 2006. But the merger was infamous due to its hostile nature – the “very successful” Southern Bank’s Tan Teong Hean was “forced” to sell it to Nazir Razak, the same brother of the then Deputy Prime Minister Najib Razak. Tan Teong Hean was simply no match for Nazir Razak’s strong political connections.'

'Beside ignoring the interest of minority shareholders, there’s another risk for creating the biggest bank from such a merger. Taking the cue from United States’ 2008′s subprime crisis, a merged CIMB-RHB-MBSB will enjoys “too-big-to-fail” advantage. Just like Federal Reserve, Bank Negara and the Malaysian government would need to bail out this giant should it fails at a later stage. What that means is taxpayers’ money will again be used to bail out the “New CIMB” bank.

There’s also the problem of eliminating redundant branches and employees after the merger, not to mention the losing of competitiveness among banks to serve small businesses and individuals better. The new CIMB will become an arrogant animal which will care for nothing but its bottom line. And it can afford to do so, because the government would be at its mercy since the giant is Too-Big-To-Fail.'

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1 comment:

Anonymous said...

Public Bank ATM in Mid Valley usually runs out of cash.