Abu Dhabi Commercial Bank bought 25 percent of Malaysia's fourth-largest lender, RHB Capital, for $1.23 billion on Thursday.

The bank said its new asset was poised for rapid earnings growth.

The United Arab Emirates bank, the third-largest in the emirate of Abu Dhabi by market value, first revealed in March it was buying the stake, another sign that Gulf Arab lenders were moving increasingly offshore as competition heats up at home.

But the final price of 7.20 ringgit, announced on Thursday, is a hefty 36 percent premium to the current share price and 3.1 times book value -- steep compared with the biggest two local banks, Malayan Banking and Bumiputra-Commerce.

RHB Capital, which was among brokers' least favourite banking stock picks when the state pension fund bought it out in March 2007, fetched 5.25 ringgit per share at 0347 GMT, up 1 percent.

Abu Dhabi Commercial Bank chairman Saeed Al-Hajeri sought to justify the price, telling reporters ahead of the deal-signing ceremony that RHB's profits could easily double in three years.

"The plan is very attractive ... very aggressive, very possible. My personal belief is that they will reach that easily," he said in Malaysia's administrative capital, Putrajaya.

The Employees Provident Fund took the extraordinary move to buy out RHB for $3.68 billion after a bidding war for the business. The fund, already a major shareholder, was convinced it could make more money by buying the bank and on-selling strategic stakes than by simply selling out to bidders at the outset.

The fund's chief executive, Azlan Zainol, who is also chairman of RHB Capital's core unit RHB Bank, said the alliance with Abu Dhabi Commercial Bank would help drive the Malaysian bank's business links with the Gulf states. - Reuters