Friday, September 15, 2006

Scotiabank Eyes Malaysia, but Denies Bid

Reuters, Mark Bendeich, 15 September 2006

Canada's Bank of Nova Scotia confirmed on Friday it was looking out for acquisitions in Malaysia, but denied a report that it planned to buy an indirect stake in the country's fourth-biggest lender.

Malaysia's Business Times, citing unnamed sources, said Scotiabank planned to buy 32.8 percent of Rashid Hussain, parent of local lender RHB Capital, for between 550-600 million ringgit ($150-$163 million).

But Rasool Khan, head of Scotiabank's Malaysian unit, told Reuters that it had no such plan to buy the stake from Rashid Hussain's major shareholder, Utama Banking Group.

"The Bank of Nova Scotia has a very keen desire to expand in four countries in Asia -- India, China, Malaysia and also Thailand and if the opportunity presents itself to us, we would be very keen on it," Khan said in a phone interview.

"But we have not had any direct discussions at a decision-making level with UBG, neither do we have a plan or have made an offer at this stage and at this price they have quoted."

The newspaper report followed Utama's rejection on Thursday of a bid for the stake from Malaysia's state pension fund, and it said Scotiabank officials had held talks with Utama officials.

Khan denied Scotiabank, Canada's third-largest bank by assets, had held bid talks and said officials from both banks met from time to time in the ordinary course of industry meetings.

"We are a very small banking community but we have never met with the chief minister of Sarawak, which would be the case if we were interested in buying," he added. Utama is controlled by the family of Sarawak Chief Minister Abdul Taib Mahmud.

Malaysia's overcrowded banking market is expected to continue consolidating after its second-biggest bank, Bumiputra-Commerce Holdings Bhd, broke a drought of domestic mergers with its purchase of smaller rival Southern Bank this year.

That deal left nine local banks, still considered too many.

The government and central bank want local banks to become larger so they can compete with big foreign lenders abroad and at home, where deregulation promises to intensify competition.

Foreign banks are keen to expand in Malaysia, which has a young population with rising incomes and low interest rates, but they cannot own more than 30 percent of a local bank and are heavily restricted in the number of branches they can operate.

Global banks Citigroup and Standard Chartered have preferred to wait for deregulation, and very slowly expand branch networks, than invest in a local lender without control.

In Malaysia, banks are not allowed to enter bid talks without approval of the central bank, which is viewed as being reluctant to allow a foreign bank to gain management control. Foreign banks already command about 22 percent of total loans in Malaysia.

Rashid Hussain holds about 65 percent of RHB Capital, seen as one of the weaker local banks and a potential takeover target.

On Thursday, Utama rejected a bid for its Rashid Hussain stake from state pension manager the Employees Provident Fund.

The fund already owns 31.7 percent of Rashid. Its unspecified bid was revealed to the market in June, raising speculation that the fund was working with other state agencies, such as investment arm Khazanah, to engineer a bank merger.

Khazanah has a direct stake in RHB Bank, a unit of RHB Capital, and owns a major interest in Bumiputra-Commerce and unlisted Islamic lender Bank Muamalat. It has a minor interest in the country's largest lender, Malayan Banking.

Utama shares were down 3.6 percent at 1.08 ringgit in late-morning trade. Rashid Hussain shares were off 1.6 percent at 1.25 ringgit and RHB Capital shares unchanged at 2.6 ringgit.
Bloomberg, Sean B. Pasternak

Bank of Nova Scotia, Canada's third-biggest bank, may make acquisitions in Malaysia, following a Business Times newspaper report that the bank plans to bid for a stake in Rashid Hussain Bhd.

``Scotiabank remains interested in looking at opportunities in Malaysia,'' spokesman Frank Switzer said today in a telephone interview. He declined to comment on plans for any specific bank.

Utama Banking Group Bhd. yesterday rejected an offer by a pension fund to buy its 32.8 percent stake in Rashid Hussain, which controls the country's fourth-biggest bank.

Scotiabank, based in Toronto, may offer between 2.30 ringgit and 2.50 ringgit a share for Utama Banking Group's stake, the Business Times said, without saying where it got the information. The Rashid Hussain stake is valued at 304 million ringgit ($82.8 million), based on the closing price yesterday.

Scotiabank, which has operations in about 50 countries, has invested more than C$1 billion ($891 million) on international acquisitions in the past year, including purchases in Peru and the Dominican Republic. Chief Executive Officer Richard Waugh has said that the bank would look at acquisitions in markets where they already have operations, which includes Malaysia. Waugh was in neighboring Thailand this week.