PETALING JAYA: CIMB Group Holdings Bhd's reach into the Asia-Pacific markets extended overnight following the acquisition of Royal Bank of Scotland's (RBS) cash equities and associated investment banking businesses for RM849.4mil.
CIMB group chief executive Datuk Seri Nazir Razak said the acquisition provides an opportunity to complete the build-up of the bank's capabilities in Asia-Pacific markets, and do it quicker and less expensive compared with organic growth.
“We have been very clear that our aspiration is to be a universal bank in Asean, and this requires strong connectivity and presence in key Asia-Pacific markets, and the connectivity needed means a significant investment banking presence beyond Asean,” he said at a press briefing. He said the acquisition is an instant expansion of the bank's platform excluding Asean, which would enable the bank to expand into jurisdictions that the bank deems important.
CIMB Investment Bank Bhd CEO Datuk Charon Wardini Mokhzani (left) welcoming Kirby to the fold, with Nazir witnessing the occasion
CIMB will pay RBS about RM431.8mil and inject a further RM417.6mil in new capital into various operating entities.
The country's second largest lender had just catapulted itself into Asia-Pacific territory in a big way with the acquisition while also maintaining and expanding its Asean operations, and emerging as the largest investment banking franchise based in Asia Pacific excluding Japan.
RBS will pay CIMB about RM67.4mil, which would be used to defray the cost of running its former business for the first year.
“It is a little bit unusual but those were the terms negotiated, where we negotiated to have them make a little bit of a contribution to help us through (the first year),” said Nazir.
He also believes that the integrated CIMB-RBS platform would strengthen its value proposition to its existing customers in Asean, while also reaching substantial economies of scale in the stockbroking business, which involves high capital investments with low margins.
Most of the RBS units would be absorbed into CIMB's subsidiary, CIMB Securities International which was last known as GK Goh Securities that the bank acquired back in 2005.
With the addition of the RBS units, CIMB will have new on-shore presence in Taiwan and Australia, as well as substantially enlarged operations in Hong Kong, India and China.
However, besides its joint venture with Daishin Securities in South Korea, CIMB still lacks a presence in the republic, with RBS not willing to sell its Korean entities to the bank for strategic purposes.
“In that respect, we need to then engage the Korean regulators to look at the possibilities of setting up CIMB operations in South Korea. We will be applying for a securities licence,” he said.
CIMB would also review several joint ventures that RBS currently has with other parties, namely RBS Morgan and Hua Ying Securities, which RBS holds a 33.3% stake and 50% stake respectively.
The bank also expects 350 to 400 existing RBS staff members to join the bank, with 82 out of the 94 key senior personnel accepting to join CIMB at press time. Leading the move to CIMB is the current RBS global banking Asia-Pacific head Matthew Kirby, who will assume the role of CIMB North Asia country head once the deal is completed.
“We do not underestimate the new and unique management challenges that this acquisition brings to us. But, we can point to our proven and exceptional record in mergers and acquisition and our integration of banking and investment banking across Asean,” Nazir said.
The acquisition would only add 1% to its current manpower, while geographically, he said the bank had no addition in terms of market, but increase in connectivity and presence in the Asia Pacific.
In terms of financial impact, CIMB has assumed economic ownership since March 1, and expects to break even this year.
“We will need a little bit of time to ramp up the business, and we hope to realise the cost and synergies in 2012, and break even or slightly negative in 2012, and after that positive,” he said.
The bank expects the deal to be completed by November this year depending on the regulatory approvals and response needed
From: The Star Online
