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CIMB pre-tax profit has contributed 22% of total overall overseas margin, and it was gain when then

touch Indonesia market. For the second quarter ended, the enlarged CIMB Niagas pre-tax contribution surged 82.8% to RM371mil from RM203mil. And of course it is something that Maybank, which is already very successful in its core commercial banking operations, seeing with full of chances to make some money there. The fight began when Maybank put their efforts to penetrate this market segment. Between the two, it looks like CIMB has gone 7 years ahead at time they first bought Bank Niaga, when many were afraid to touch Indonesian assets, at much cheaper price of 1.5 times book value as compared to Maybank acquisition with Bank Internasional Indonesia (BII) at 4.6 times of its book value. While Maybank was busy settling external and internal issues related to the Indonesian governments regulations and huge impairment charges at BII, CIMB was building its fort in Indonesia by merging Bank Niaga with Bank Lippo. That brings CIMB Niagas branch network in Indonesia to 654 which definitely overshadows BIIs 250 at the moment. But, with a new team in place, BII appears resolute and confident that it can make some money at the operating level by year-end although it will take three to five years to be cover back their loses. And their first priority was to address the motorcycle financing problems before moving further to improve consumer residential and automotive industri, also SME and corporate banking at BII itself. Maybank Initial expectation for BII are not high but as the momentum builds up, Maybank hopes to at least obtain a return on investment that is equivalent to the cost of debt (taken to fund the acquisition) at about 6%, which comes up to about RM474mil. And it was known that Maybank has planned a good future steps. But, to remind us again, the competition between CIMB and Maybank in Indonesia will become more intense should Maybank double its number of branches at BII, by which time, CIMB would have done something else to fortify its position. But that was not the issues here.

It starts when Malaysia's central bank has directed to restructured the board of directors of Maybank, in an unprecedented government displeasure on a board of a financial institution. It was caused by the displeasure at the controversial acquisition of BII by Malayan Banking (Maybank) last year. As a results of restructured, the bank did announce the retirement of two directors and the

appointment of three new members mid-last month at that time. Between end-October in 2008, when the acquisition of BII was completed, and in March, three directors have resigned. Bank Internasional Indonesia (BII) was bought from Sorak Financial Holdings Private Ltd owned by Singapore government investment agency Temasek (75%) and Koreas Kookmin Bank (25%) at a price that was deemed too high. Maybank has entered into an agreement to buy a 55 per cent interest in BII and agreed to pay USD1.5 billion (SGD 2.2 billion) for the share and then make a tender offer for the remaining 44 per cent for USD1.2 billion roughly. But the global financial meltdown raised questions over the health of banks as many criticism made that Maybank was paying too high for BII. Maybank position further undermined when Indonesia government introduced changes to its corporate takeover rules, which called for Malaysian financial institution to sell down 20 per cent of its holdings in BII within two years of its takeover. Bankers close to Maybank had argued that the disposal was surely to lead to massive losses. Faced with the prospect that the deal could adversely hit Maybank and the Malaysian banking system, Bank Negara had revoked its approval for the BII acquisition. The approval then was given back and the deal was finalized after the Singapore government investment agency Temasek agreed to lowered the purchase price for the transaction by USD 220.5 million for the 55 per cent interest in BII. In Bank Negara's review, which was completed in April 2009, concluded that Maybank's purchase price for BII was too expensive. And the central bank also concluded that the Malaysian financial institution did not put in place for adequate measures to protect itself in the event that the deal encountered problems.