Malaysian retail bank Southern Bank had its expansion plans scuppered in December by Bank Negara Malaysia, the countrys central bank, after BNM refused to approve Southern Banks proposed acquisition of Asia General Holdings, a Singapore general insurance company.
Although BNM gave no reasons for the rejection, it is thought to be keen to see a merger between Southern Bank and state-controlled bank CIMB, itself in the midst of a merger with another lender, Bumiputra-Commerce Bank. BNM granted CIMB permission to open merger talks with certain shareholders of Southern Bank in October.
The move has prompted a serious board rift at Southern Bank, with the resignation in December of the banks chairman, believed to be in favour of a merger with CIMB, while the CEO is set against the idea. The deck is stacked in CIMBs favour. Temasek Holdings, a discloseable shareholder in Southern Bank, has been a recent seller and Southern Banks board was recently forced to adjourn indefinitely the shareholder meeting called to approve the Asia General Holdings deal. Expect CIMB to emerge victorious.