There is still room for mergers and acquisitions (M&A) as well as bank consolidations in the country, driven by a further liberalisation of the sector by Bank Negara Malaysia, says AllianceDBS Research.

It said the need for banks to build up their domestic or regional scales to remain relevant and competitive would also pave the way for M&As.

The government has relaxed the foreign equity participation for Islamic banks, investment banks and insurance companies by up to 70 per cent foreign ownership.

Recently, for unit trust management companies, up to full foreign ownership was allowed.

For commercial banks, there is a 30 per cent limit on strategic foreign shareholdings.

“If this cap is raised, possibly on a case-to-case basis, it could spark M&A opportunities among Malaysian banks or open doors for new strategic partnerships,” the research firm said in a note today.

Banks such as AMMB Holdings Bhd, RHB Capital Bhd (RHBCap), Alliance Financial Group Bhd and Affin Holdings Bhd have foreign strategic shareholders with holdings ranging from 15 per cent to 25 per cent.

On the Malaysia Building Society Bhd (MBSB), CIMB Group Holdings Bhd and RHBCap merger proposal, AllianceDBS said the structuring of a mega Islamic bank would give CIMB a first-mover advantage to tap into the large “unbanked” Muslim population in the region.

It also anticipates that Malayan Banking Bhd (Maybank) would not sit still and let CIMB “steal the thunder”.

AllianceDBS believes a proposed merger of Maybank and BIMB Holdings Bhd is conceivable, as both entities would be able to leverage on their leading positions in Islamic banking.

“We think a proposed merger of Maybank Islamic and BIMB would be more appealing when it comes to creating a truly mega Islamic bank,” it added. — Bernama