CIMB Set to Take on Goldman With ‘Audacious’ RBS Purchase

CIMB Group Holdings Bhd. (CIMB), Southeast Asia’s top-ranked investment bank over the past three years, is taking aim at a bigger market following its acquisition of some of Royal Bank of Scotland Group Plc (RBS)’s operations in Asia.

The Malaysian company can now compete with rivals including Goldman Sachs Group Inc. and JPMorgan Chase & Co. for Asia- Pacific deals, Chief Executive Officer Nazir Razak said in an interview in Kuala Lumpur. CIMB agreed in April to buy most of Edinburgh-based RBS’s investment banking and cash equities businesses in the region for $142 million.

The acquisition, which initially seemed to be an “audacious” idea, will complete the bank’s operations and help CIMB boost market capitalization to more than 100 billion ringgit ($31 billion) by 2015, Nazir said. That’s about 75 percent more than its current value. The Kuala Lumpur-based lender also targets becoming one of the top three Southeast Asian banks by assets and return on equity.

“CIMB today is complete for the endgame in 2015,” Nazir, 45, said on June 20. “Building up the investment banking platform in Asia Pacific ex-Asean in small pieces was painful and quite expensive because you have to hire people gradually and people cannot see how serious you really are. With this position, we instantly get scale.”

Acquisition Spree

Their agreement allows CIMB, Malaysia’s second-largest bank by assets and market value, to absorb or buy RBS’s operations in markets including Australia, Hong Kong, Indonesia and Thailand, according to a presentation posted on its website. Matthew Kirkby, head of global banking at RBS for Asia-Pacific, is among 331 employees who will transfer.

“We find our relationship with CIMB a very good match,” Nicholas Rowe, head of investment banking at RBS in Australia, said in an interview in Kuala Lumpur on June 14. “With the Asian century facing us, the actual growth in the markets, M&A business and capital flows is more going to be focused on the eastern side of the chart with Asia, particularly Asean.”

Nazir, the son of former Malaysian Prime Minister Abdul Razak Hussein and a younger brother of current Prime Minister Najib Razak, joined the corporate advisory division of CIMB Investment Bank Bhd. in 1989. After the firm’s securities and commercial lending operations were combined, he became CEO of the group in November 2006.

Since then, CIMB has spent about $2.32 billion on 19 acquisitions, including the purchase announced last month of a 60 percent stake in the Philippines’s Bank of Commerce for 12.2 billion pesos ($287 million).

‘Strong Leadership’

“We’re excited about the group’s recent acquisitions,” said Cheah King Yoong, an analyst at Alliance Financial Group Bhd. (AFG) in Kuala Lumpur. “CIMB has transformed from a niche domestic bank to a reputable universal bank in the region under Nazir’s strong leadership and his competent management team.”

CIMB fell 0.5 percent to 7.54 ringgit as of 2:45 p.m. in Kuala Lumpur trading today. It has risen 1.3 percent this year, under-performing a 4.9 percent gain in the benchmark FTSE Bursa Malaysia KLCI index.

The Malaysian lender, set up in 1965 by the government as Bank Bumiputra Malaysia Bhd., is ranked first in takeover advisory and in managing equity and bonds sales in Southeast Asia over the three years to June 21, according to data compiled by Bloomberg.

In underwriting capital-market deals for the region, CIMB beat out DBS Group Holdings Ltd. and HSBC Holdings Plc, while RBS trailed at No. 35, the data show. For takeovers, it trumped Morgan Stanley, Credit Suisse Group AG and Goldman Sachs, with RBS lagging behind at No. 19.

Asian Ranking

Still, as an adviser on mergers and acquisitions for companies across the Asia-Pacific region over the same period, CIMB was No. 35, while Goldman Sachs, Morgan Stanley and JPMorgan, all based in New York, took the top three spots. RBS ranked No. 17, the data show.

Asian lenders will gain more prominence as global economic power shifts to the region, and local banks should seize the opportunity in capturing deal flow, Nazir said.

“This is not going to be an Asian century unless Asians are willing to step up,” he said last week. “In many ways, this is how we are putting our money where our mouth is.”

The chief executive is already tapping his firm’s regional network to win mandates.

Regional Mandates

CIMB helped manage last month’s $141 million initial public offering of Thai AirAsia Co.’s parent, Asia Aviation Pcl, in Bangkok. It was also among the managers for Genting Singapore Plc (GENS)’s S$1.8 billion ($1.4 billion) perpetual bond sale this year and assisted Saudi Arabia-based Islamic Development Bank in selling $800 million of Shariah-compliant debt last week.

The lender is benefiting from Malaysian companies that are pushing ahead with IPOs even as markets worldwide are roiled by concern that global growth will slow amid Europe’s protracted debt crisis.

CIMB helped raise $3.3 billion for Kuala Lumpur-based plantation owner Felda Global Ventures Holdings Bhd. in this year’s biggest IPO after Facebook Inc.’s $16 billion share sale. It is also advising IHH Healthcare Bhd., Asia’s largest hospital operator, on the company’s planned offering.

Its bigger Southeast Asian rivals are expanding at the same time through acquisitions, seeking to tap growth in the region’s fastest-growing emerging markets.

New Employees

DBS Group, Southeast Asia’s biggest bank, said on April 2 that it offered to buy PT Bank Danamon Indonesia for about $7.2 billion. Malayan Banking Bhd. (MAY), Malaysia’s biggest bank by assets and market value, last year acquired Singapore’s Kim Eng Holdings Ltd.

The acquisition of RBS’s assets and some new hires will give CIMB, Southeast Asia’s fifth-largest bank by assets, an additional 130 employees in Hong Kong, as well as 125 in Australia, 60 in India, and 20 in New York and London. About 26 employees would be added in China, Singapore and Taipei.

RBS’s operations in the Asia-Pacific region are also complementary to CIMB’s own, the chief executive said last week. The turmoil in global equity markets and beleaguered valuations for investment banking operations globally made the timing for the purchase “favorable,” he added.

“When I first saw it, I thought it was outrageous for us,” Nazir said. “Audacious as it seems at first glance, when you think about the build out of our platform, it was an opportunity to actually complete what we were trying to do in China, India, even Australia, Taiwan and Korea.”

To contact the reporter on this story: Chong Pooi Koon in Kuala Lumpur at pchong17@bloomberg.net

To contact the editors responsible for this story: Barry Porter at bporter10@bloomberg.net; Chitra Somayaji at csomayaji@bloomberg.net

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