UPDATE 1-Malaysian pension fund said to consider buying rest of RHB Capital
* EPF would have to pay $2.75 bln at current share price
* 2nd-biggest shareholder Aabar sitting on a loss on RHB
* EPF may try to merge RHB, Malaysian Building Society-sources
By Saeed Azhar and Yantoultra Ngui
SINGAPORE/KUALA LUMPUR, June 21 (Reuters) - Malaysia's state pension fund is considering buying the 59 percent of RHB Capital Berhad that it does not already own and has hired Goldman Sachs to advise it on its options, people familiar with the matter said.
The fund, the Employees Provident Fund (EPF), wants to privatise RHB to merge it with property financing firm Malaysian Building Society Bhd (MBSB) and later relist the merged group as part of a restructuring, the people said. The fund also owns nearly 60 percent of MBSB.
The move is another sign of consolidation in Malaysia's financial sector as it prepares for higher capital requirements under Basel III rules, which were drawn up to avoid a repeat of the financial crisis that followed the collapse of Lehman Brothers in 2008.
RHB, Malaysia's fourth-largest bank, has a market capitalisation of $6.8 billion. Abu Dhabi's Aabar Investment is RHB's second-largest shareholder, with a 22 percent stake, followed by OSK Holdings with 9.8 percent.
Based on RHB's current share price, EPF would have to pay 8.8 billion Malaysian ringgit ($2.75 billion) to take RHB private. But the move would face resistance because Aabar is sitting on a loss on its investment.
Aabar bought 22 percent stake of RHB for 10.8 Malaysian ringgit ($3.43) a share from Abu Dhabi Commercial Bank in 2011, and the purchase price is 20 percent above RHB's current share price.
Aabar is unlikely to favour the privatisation, said a source close to the fund, who declined to de identified. The source added that Aabar was not happy with RHB's current dividend payout.
EPF and Aabar were not immediately available to comment. A spokeswoman for Goldman Sachs declined to comment.
Brokerage HwangDBS said the restructuring would be positive.
"Such a restructuring within the RHB Banking Group and possibly MBSB could put the eventually to-be-listed RHB Bank in an improved capital position and add a new revenue stream from MBSB's lucrative financing business," HwangDBS Vickers Research said in a research note on Friday.
But HwangDBS Vickers cautioned that MBSB's high non-performing loans would need to be resolved first because they would double RHB's current bad loans.
Such a merger would also bring down RHB's core capital. The group's banking arm, RHB Bank, now has a core capital ratio of 10.85 percent.