At 10.25am, RHB Capital fell 45 sen to RM9.15 with 3.6 million shares traded.

The Straits Times, citing executives close to the situation said the decision by the two banks came after one of RHB's shareholders, Abu Dhabi Commercial Bank , signed the sale agreement of its 25 percent stake in RHB with Abu Dhabi-based investment fund Aabar Investments for 10.80 ringgit ($3.56) per share.

The sources said the stake sale by Abu Dhabi Commercial Bank has complicated the proposed takeover, according to the paper.

"Pricing wise, the takeover doesn't make much sense now. There is going to be a cooling down and the two banks may revisit the prospect of a merger with RHB at some other time," it quoted a senior financial executive as saying.