Sunday, 21 October 2012

Banks unlikely to raise capital

Wednesday October 10, 2012


PETALING JAYA: Banks in Malaysia are already well-capitalised and are unlikely to engage in capital raising activities in the near term unless they are looking at significant outlay in that time frame, said banking analysts.
In the case of Malayan Banking Bhd (Maybank) which recently raised a record RM3.66bil via a private placement exercise, the bank was priming itself to expand its current business in the region, a banking analyst said.
It is understood that via a conference call with analysts yesterday, Maybank said that it was looking to strengthen its current businesses in the region, including those in Singapore and Indonesia and that it was not looking at any merger and acquisition (M&A) activity for now as previously speculated.
“We believe that most banks in Malaysia are unlikely to engage in capital raising activities in the near term given that they are well capitalised to meet the Basel III requirement, unless they foresee that they may need capital for something else.
“We do anticipate that most banks will be in capital conservation mode to preserve their capital in order to meet the capital requirement under Basel III which will kick off next year,” Alliance Research banking analyst Cheah King Yoong said.
The core equity capital ratio, which measures the amount of capital a bank has, is generally above 7% for all banks in Malaysia and this is healthy enough to meet Basel 111 requirements, according to Cheah (see table).
The new Basel III rules require banks to hold top quality capital totalling 7% of their risk-bearing assets, from the current 2%.
Of the 7%, 4.5% comprises core tier-1 capital, which is made of shares and retained earnings, and an additional 2.5% of capital conservation buffer.
In a press release on Monday, Maybank said its private placement exercise was a move to boost its equity capital ahead of the implementation of the Basel III capital framework.
The funds raised would also support its growth objectives, particularly, in relation to the rapid expansion of its business in Indonesia, Philippines and other regional markets, it said.
Apart from the continued strength of the Malaysian domestic economy, Maybank was seeing tremendous opportunities in the economic growth across the Asean region, it added.

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