INVESTORS’
PERSPECTIVES ON THE CREATION OF ANCHOR BANKS: A CASE STUDY ON PUBLIC BANK
BERHAD, EON BANK BERHAD AND
HONG
LEONG BANK BERHAD
PHANG YING YING
This
paper studies the investors’ perspectives on the foundation of 10 anchor banks
in Malaysia, which took effect at the end of year 2000. The initiative of bank mergers was actually
an insight since 1980s. However, Bank Negara Malaysia has revised its stand,
and set an ambitious target to carry out this bank merger program on 29 July
1999 to further strengthen the domestic banking institutions in order to meet
the demands of changing domestic economic structure, and face the future
challenges from globalization and liberalization so that Malaysian banking
sector can contribute more effectively towards an sustainable economic growth.
Thus, this paper intends to examine whether the merging program is essential
for the banks to survive in the future by looking into the financial
performance and position of the banks after the financial crisis in 1997, and
the portfolio selection from the investors’ perspectives after the creation of
anchor banks. The scope of this study is concentrated on only three anchor
banks, which are Public Bank Berhad, EON Bank Berhad, and Hong Leong Bank
Berhad. To further assist the findings of this paper, both primary data and
secondary data were obtained so that the mean return, standard deviation,
median return, recurring profit, ROE, and borrowing ratio can be calculated to
assess the difference of the banks’ financial performance and position.
Additionally, the portfolio theory developed by Markowitz is used to examine
whether the banks’ shareholders are benefiting from the merger program by
calculating the optimal portfolios of each individual bank to compare with the
anchor banks’. The combination of portfolios and the optimal choices of
holdings for the investors are discussed. In fact, it has been found that the
creation of anchor banks would preserve the stability of Malaysian banking
industry to face the stiff competition and the onslaught of globalization and
liberalization.
Full text source:
B. A. (Hons) In Finance
Number: 2