Press statement

(For Release after 12 midnight Sunday 10 January 2010)

PROPOSED OF TAKEOVER OF EON BANK BY

HONG LEONG BANK

SBEU DOES NOT BELIEVE TAKEOVER IS IN THE BEST

INTEREST OF CUSTOMERS.

SBEU is very concerned on the adverse impact of the proposed

takeover of EON bank by Hong Leong bank as it will result in reduced
bank branches in Sarawak. Given that both banks originate form
Sarawak, Hong Leong is previously Kwong Lee Bank and EON bank
previously Kong Ming Bank, there will be major duplication of the Bank
Branch in Sarawak.

SBEU is also not convinced that the merger will bring in long term
benefits.

1. COST SAVINGS AND EFFICIENCY GAINS

a. The usual argument for merger is that it is expected to

bring about greater efficiency to banking operations. The
same extent of banking services can be provided to the
whole country at lower costs due to savings on manpower,
information system and reduction in branch network.

b. We have evidence that there is no clear link between bank

mergers and improved efficiency. Cost-savings resulting
from bank mergers are often confused with efficiency
gains.

c. 'For example, while an in-market merger is bound to

result in cost-savings when neighbouring branches are
closed down, this does not necessarily indicate improved
efficiency in the long-run. The public may not benefit
from the merger and any improvement to the bottom line
is likely to be short lived'

d. Mergers does not necessary bring about improvement in

efficiency. Those who asserted that there would be should
demonstrate them, before they are allowed to merge.

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2. BRANCH CLOSURE

a. Branch closures due to mergers have huge negative

impact and social cost to employees in terms of job
security and to the pubic in terms of accessibility to
banking services.

b. Any merger will inevitably result in a net reduction of

branches. Our concern is that, in the drive to quickly
realise the costs of the purchase, a bank will close down
too many branches in order to show quick cost-saving
returns.

c. Our experience has shown that HLB has aggressive in

closing down branches in Sarawak especially in rural
Sarawak.

3. ROLE OF SMALL BANKS

a. Bigger does not necessarily mean better for customers.

There is some evidence that bigger banks mean bigger
fees and also customer service seems to drop away

b. The evidence is also mixed on whether bigger banks

actually bring benefits for customers. In terms of
customer service, smaller banks typically rank ahead of
bigger banks.

c. Malaysia has a sizeable rural population and different

levels of development in different regions, especially those
in the east cost of Pen Malaysia and in Sabah and
Sarawak. There is still a need to have small banks that
understand the local conditions and able to serve the
particular need of small business and depositors.

d. In Malaysia the small banks play a very useful role and

service to the small bushiness and rural communities.
Removing them will encourage money lending to be driven
underground and the increase in loan sharks. We are
talking about the small traders, contractors, retail outlets,
small holders and farmers which provided crucial services
and employment to hundred of thousands of Malaysians.

e. Malaysia, with its wide variety of industries with unique

funding needs spread over a large geographic area, would
be better served by a mixture of small and large banks
allocating credit in a more efficient manner.

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4. RISK OF BIG BANKS

a. The financial Crisis has clearly proven our fears that big
banks are dangerous. Theye become too big and arrogant
and take huge risks driven by shareholders greed and
require huge bail outs by tax payers.

b. Such big banks might be even encouraged to take greater

risk, knowing that the government would be likely to bail
it out.

c. The consequences of a big bank failure are much greater.

This is because the individual banks, being bigger, are
more likely to have significant exposures to each other, so
that the failure of one bank might render the other banks
also insolvent (as a result of their inability to recover
inter-bank advances.

5. REDUCTION IN COMPETITION

a. Mergers will result in a significant reduction in the number

of effective competitors in the Financial sector in Malaysia
especially to small business and depositors.

b. It is not unreasonable to conclude that increase

concentration of a few banks in Malaysia might allow bank
to increase their profit margins and increase the cost of
financial services for bank customers.

c. The belief that the replacement of many competing

institutions by a few mega- institutions will lead to
economies of scale that should result in cheaper fees has
been proven to be a fallacy

6. CONCLUSIONS/RECOMMENDATIONS

a. Mergers will only work if there is meaningful, thorough

and transparent consultations with all affected groups.
There must be public and meaningful inquiry. Failure to
review mergers publicly and openly would tend to
aggravate public concerns over whether they were getting
a fair deal from banks.

b. Take-overs and mergers need to meet a test of wider

public interest - including customer service and
community needs.

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 c. Therefore there is little empirical evidence to support the
the Takeover of Eon Bank by Hong Leong bank. The only
people who will make quick gains (and short term) are
certain shareholders.

d. EON Bank should continue to be independent and provide

a choice to customers.

ANDREW LO

CHIEF EXECUTIVE OFFICER

8 JANUARY 2010