汇丰银行-马来西亚-银行业-rhb和ammb合并谈判取消-20170823-malaysia banks：rhb and ammb merger talks called off-20170823-hsbc

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1、23August2017MalaysiaBanksEQUITIESFIGRHBandAMMBmergertalkscalledoffMalaysiaAMMBandRHBarenolongerinmergertalksKarWengLOO*AnalystTheHongkongandShanghaiBankingCorporationLimited,SectorconsolidationdoesnothelpprofitabilitySingaporeBranchkarwengloo@hsbc.com.

2、sgAMMBisourleastpreferredMalaysianbankstock+6566580621XiushiCAI*AnalystRHBandAMMBhavecalledoffmergertalks.ThetwocompaniesstatedtheyhadTheHongkongandShanghaiBankingCorporationLimited,SingaporeBranchnotreachedmutuallyacceptabletermsandconditionsfortheproposed

3、merger,butxiuhsicai@hsbc.com.sgprovidednofurtherdetails(seeRHBandAMMBenterintomergertalks,1June2017).+6566580617Thisnewssignalsthatconsolidationinthebankingsectorhasgroundtoahaltsince*Employedbyanon-USaffiliateofHSBCSecurities(USA)Inc.andnotCIMBacquiredSouth

4、ernBankin2006.Recallthatthelastproposedmergerbetweenregistered/qualifiedpursuanttoFINRAregulationsCIMB,RHBandMalaysiaBuildingSocietyin2014alsofailedtomaterialize.Consolidationhasfailedtoimprovepricingpowerorprofitability.Conventionalwisdomdictatesthatconsoli

5、dationshouldimprovepricingpowerandprofitability.Thisisnothingmorethanamyth.Weonlyhaveeightdomesticbankstodaycomparedto21in1997.Sector-levelNIMhasfallento2.1%in2016comparedtomorethan3%before1998.Sector-levelPPoPROAin2016wasonly1.5%comparedtoc.2.5%pre-1998.The

6、factsanddataprovidestrong,hardevidencethatconsolidationdoesnothingtoimproveprofitability,atleastnotinMalaysia.Impedimentstoconsolidation.HistoryprovesthatM&Aactivityinthebankingsectortendstohititspeakrightafterasystemiccrisis.Otherwise,M&Aactivityrarelyhappe

7、ns.Generally,ownersareeitherreluctanttosellorhaveultra-highaskingpricesduringboomtimes.Duringsoftperiodsofgrowth,theretendstobeadearthofpotentialbuyers.Coupledwiththefactthatsectorconsolidationdoesnothingtohelpwithprofitability,itishardtoimaginealotofM&Aacti

8、vityintheforeseeablefuture.AMMBisourleastpreferredstock.WebelieveAMMBismoresusceptibletoROE✔VoteinAsiamoneyBrokersPoll2017andearningserosionstemmingfromthenormalizationofcreditcostsandfundingVot