Market to determine number of Malaysia banks

The market will determine the number of banks in the country, which currently are well-capitalised. Malaysia has nine financial services groups with Malayan Banking Bhd, CIMB Group Holdings Bhd and Public Bank Bhd in the top three.

Bank Negara Governor Tan Sri Dr Zeti Akhtar Aziz said banks have reached a “minimum size and are well-capitalised with quality capital that has enabled them to take advantage of economies of scale”.

“In the current environment, we leave the number of banks to be determined by the market,” she told reporters after her keynote address at the Financial Inclusion Policymakers Forum yesterday. Former Finance Minister Tun Daim Zainuddin last Friday warned that there were “way too many banks” in the country. He cautioned that only big banks with huge capital could sustain if there were another economic crisis.

Underscoring Daim's remarks were speculation in recent weeks of more merger and acquisition (M&A) activity to come among banks mirroring the activity in the wider market and following the imminent takeover of EON Capital Bhd, the owner of EON Bank Bhd by Hong Leong Bank Bhd.

The speculation was further reinforced by an early March report quoting Prime Minister Datuk Seri Najib Tun Razak, who said the Government might consider allowing Australia and New Zealand Banking Group Ltd to raise its 23.8% stake in AMMB Holdings Bhd, the owner of AmBank (M) Bhd, to 49 percent.

Foreign shareholdings in local banks is currently capped at 30 percent.

Singapore's investment arm Temasek Holdings Ltd is keen to take a bigger stake in Alliance Financial Group Bhd (AFG), the owner of Alliance Bank Malaysia Bhd via Langkah Bahagia Sdn Bhd, which was interested in selling its 14.8% stake held via Vertical Theme Sdn Bhd.