The announcement that it will enter into a memorandum ofunderstanding with Phileo Allied comes ahead of a January 21 government deadline for banks to announce consolidation plans.

Phileo wanted to merge with Maybank because of synergies between the two groups, and not with Multi-Purpose Bank as it had originally been instructed to do by the government, a banking executive told Reuters.

Phileo Allied said in a separate statement on Monday its memorandum of understanding, signed in September last year to sell PhileoAllied Bank to Multi-Purpose Bank, has lapsed.

Phileo Allied has interests in banking and stockbroking, and is seen by analysts as one of the country's most innovative Financial groups in terms of technology, offering virtual banking services to its clients through three kiosks around the capital Kuala Lumpur.

PhileoAllied Bank has 29 branches in the country and shareholders' funds of 391 million ringgit.