Abu Dhabi Commercial Bank bought a $1.23 billion stake in Malaysia's fourth largest lender, RHB Capital, on Thursday in a bid to exploit growing commercial ties between the Middle East and Asia.
The United Arab Emirates bank, the third-largest in the emirate of Abu Dhabi by market value, predicted explosive profit growth for RHB after its purchase of the 25 percent stake, done at a hefty 36 percent premium to the bank's current price.
Abu Dhabi Commercial Bank first revealed in March it was buying the stake, another sign that Gulf Arab lenders were moving increasingly offshore as competition heats up at home. But the final price of 7.20 ringgit a share, announced on Thursday, is 2.2 times RHB's book value, compared with the biggest two local banks, Maybank (1.6 times) and Bumiputra-Commerce (2.1 times), based on company data.
Abu Dhabi Commercial Bank Chairman Saeed Al-Hajeri told reporters at the deal-signing ceremony that RHB's profits could easily double in three years. "The plan is very attractive ... very aggressive, very possible. My personal belief is that they will reach that easily," he said in Malaysia's administrative capital, Putrajaya.
RHB posted a 63 percent jump in annual net profit in 2007 to 713 million ringgit ($225 million), but it has the lowest return on equity of the top four biggest Malaysian banks. RHB Capital, which was among brokers' least favourite banking stock picks before the state pension fund bought it in March 2007, last traded at 5.25 ringgit per share. The stock was suspended on Thursday after the deal was announced.