MBSB sets a high bar post-merger with MIDF

PETALING JAYA: With Malaysia Building Society Bhd (MBSB) set to be a full-fledged bank post-merger with Malaysian Industrial Development Finance (MIDF), the enlarged group could potentially see a better top line delivery ahead, says Kenanga Research.

In a note, the research firm said the group’s operations will be more efficient post-merger, resulting in improved revenue performance.

“Their respective portfolios reflect minimal overlaps in terms of product offerings and hence could see more complementary benefits.

“At the same time, it presents an opportunity to consolidate and optimise back-end operating functions.

“A successful execution could lead the enlarged bank to come closer to delivering double-digit return on equity, as aspired by the group,” said the research house.

It also pointed out that MBSB may require at least a year post-completion to “sync” the two entities, before it is able to implement the anticipated growth strategies.

Kenanga Research said MIDF’s strong suit revolves around development finance, investment banking and asset management.

While MBSB has established a notable presence in the former, Kenanga Research said it lacks the licence to offer the remaining solutions.

“The addition of wider corporate and investment banking capabilities could present MBSB as a more desirable financier to small and medium enterprises and large corporations, where the group has been aggressively striving to play a bigger role.

“Meanwhile, a new asset management unit could open wealth management offerings to retail customers with hopes of increasing their stickiness,” it added.

Based on their respective books in the first quarter of financial year 2023, 71% of MBSB’s financing portfolio comprises retail banking while MIDF has only 33%.

That said, MBSB’s total financing portfolio amounts to RM39.2bil as compared to RM2bil from MIDF.

MBSB will be taking over MIDF, which is wholly-owned by Permodalan Nasional Bhd (PNB), at a cost of RM1.01bil.