Potential Affin Bank-AMMB Merger Faces Scrutiny Over Valuation and Strategic Fit
Affin Bank-AMMB Merger Faces Scrutiny Over Valuation and Strategic Fit
KUALA LUMPUR, May 23, 2025 — Speculation surrounding a potential merger between Affin Bank Bhd and AMMB Holdings Bhd continues to stir debate in Malaysia’s financial sector, with analysts raising concerns about valuation challenges and strategic alignment, according to industry sources.
The Sarawak state government, which holds a 31.25% stake in Affin Bank through its wholly-owned subsidiary SG Assetfin Holdings Sdn Bhd, is reportedly exploring options to acquire a significant stake in AMMB Holdings to facilitate a merger. This move aims to create a stronger banking entity, potentially positioning the combined group as Malaysia’s fourth-largest banking group by assets. However, analysts at RHB Investment Bank Bhd have expressed skepticism about the deal’s feasibility.
In a research note issued today, RHB Investment Bank highlighted that a merger would likely involve substantial issuance of new shares, leading to significant dilution for existing shareholders. “While the strategic intent to consolidate and strengthen market presence is clear, the valuation gap between Affin and AMMB poses a challenge,” the note stated. It suggested two possible scenarios: one where AMMB acquires Affin at a price-to-book value (P/BV) ratio of 0.7 times, implying an acquisition price of approximately RM3.00 per share for Affin, and another where Affin acquires AMMB, requiring an estimated 8 billion new shares to be issued.
The first scenario could raise AMMB’s target price to RM6.50 for the financial year 2026, but RHB cautioned that a low acquisition price might face resistance from Affin’s minority shareholders. The second scenario, while potentially preserving Affin’s leadership in the merged entity, would dilute Sarawak’s stake significantly, potentially reducing its influence.
Recent reports indicate that Sarawak approached Tan Sri Azman Hashim, who holds an 11.83% stake in AMMB through Amcorp Group Bhd, to discuss a possible stake acquisition. However, sources close to the matter suggest that negotiations have stalled due to disagreements over pricing and the post-merger leadership structure. Sarawak is said to prefer Affin leading the combined entity, a condition that has reportedly met with reluctance from AMMB’s stakeholders.
“Affin Bank and AMMB have complementary strengths, but aligning their strategic visions and satisfying shareholder expectations will be critical,” said an analyst from TA Securities. “The market is wary of the dilution impact and uncertainties surrounding the merged entity’s direction.”
AMMB, which wholly owns AmBank (M) Bhd, is Malaysia’s sixth-largest banking group by assets, while Affin Bank ranks seventh among the country’s eight banking groups. A successful merger could enhance their competitive positioning, particularly in retail and corporate banking, but analysts remain cautious about the deal’s immediate benefits.
Source: Free Malaysia Today
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