CIMB Group Holdings Bhd and Malayan Banking Bhd risk overpaying for RHB Capital Bhd as they get set to battle to become Southeast Asia’s largest lender.

RHB Capital, based in Kuala Lumpur, trades at 2.21 times its book value per share, compared with an average 1.63 times for Asia-Pacific banks, according to data compiled by Bloomberg. The median price-to-book value among 39 similar banking acquisitions in the past five years was 1.78, data show.

The lender on Friday applied for central bank approval to begin separate merger talks with Maybank, as the nation’s largest lender is known, and CIMB, which is led by Malaysian Prime Minister Najib Razak’s brother. That has set the stage for a takeover battle as both lenders aim to cement their dominance as they expand abroad amid competition from foreign rivals at home.

“RHB is already on the high side,” said Choo Swee Kee, chief investment officer of TA Investment Management Bhd in Kuala Lumpur. “Two times book is the maximum they should pay.”

Malaysian billionaire Quek Leng Chan’s Hong Leong Bank Bhd. last month bought local rival EON Capital Bhd. for 5.06 billion ringgit (US$1.7 billion) to overtake RHB as the nation’s fourth-largest bank. The transaction valued EON Capital at 1.42 times book value.

Shares of RHB, whose biggest stakeholders are the nation’s Employees Provident Fund and Abu Dhabi Commercial Bank PJSC, have climbed 8.2 percent to the highest since March 1997 following announcements by Maybank and CIMB that they won approval for the talks.

“They want to see who is going to be the biggest bank in Southeast Asia,” said Johan Tazrin Ngo, Managing Director of Kuala Lumpur-based Amara Investment Management Sdn. “CIMB is trying to emphasise on its retail and commercial banking side. A merger with RHB would probably help it do that even more.”

The combined market value of CIMB and RHB would be $27.8 billion, based on Thursday’s closing price. Maybank could boost its capitalization to $28.9 billion, which would exceed the $28 billion value for Singapore’s DBS Group Holdings Ltd, Southeast Asia’s largest lender.

“As there are now two competing bids, this may fuel some form of valuation premium,” said Keith Wee, an analyst at OSK Research Sdn. in Kuala Lumpur. “Both CIMB and Maybank aim to be the top five universal banks in Southeast Asia within the next five years.”