Talks between Malaysia Building Society Bhd (KLSE:MBSB) and Bank Muamalat Malaysia Berhad may come to an end. According to the news report, the talks to create a stand-alone Islamic entity seem to have hit a snag and the merger may even be called off. The Edge quoted sources as saying, “They're not calling it a day yet.

But with just a few days left and neither side looking ready to budge, it's likely that the merger plan will be aborted”. Bank Negara Malaysia (BNM) recently approved their requests for a one-month extension to February 2, 2016 to conclude negotiations after they failed to do so within the stipulated three-month period to December 2015. According to the report, it is understood that February 2, 2016 is the final extension that BNM is giving them.

One source said that the parties involved have not been able to agree on valuations as Bank Muamalat's 70% shareholder DRB-HICOM Berhad (KLSE:DRBHCOM) is expecting an ‘unreasonably high' valuation for its unit. The sources further added that it was initially expected that the shareholding structure of the merged entity would be such that the Employees Provident Fund of Malaysia (EPF) ends up as the largest shareholder with a 40% stake, followed by DRB-Hicom with slightly less than 30% and Khazanah Nasional Berhad, which owns the remaining 30% stake in Bank Muamalat, about 10%. But DRB-Hicom has indicated that it wants a larger shareholding and at least equal control with the EPF.

The report further added that should they decide to call off the merger, both MBSB and Bank Muamalat will have to go back to the drawing board with regard to their future.