Maybank sees much better FY10

Maybank sees much better FY10

Tags: An Binh Bank Bank Internasional Indonesia BII commercial banking Corporate banking Datuk Seri Abdul Wahid Omar FY10 Impairment charge LEAP30 Maybank MCB Bank Ltd NPLs Overseas acquisitions SME

Written by Ellina Badri
Wednesday, 26 August 2009 11:01

KUALA LUMPUR: MALAYAN BANKING BHD [] (Maybank) is looking forward to a better performance in the financial year ending June 30, 2010 (FY10), driven by its domestic commercial banking business and its international operations, especially in its 97.5%-owned Bank Internasional Indonesia (BII).

This follows a 76% year-on-year decline in net profit to RM691.88 million in FY09, mainly due to impairment charges stemming from its overseas acquisitions.

Revenue grew 8.92% to RM17.59 billion in FY09, while earnings per share fell to 12 sen from 53.32 sen. It declared a final dividend of eight sen per share less tax.

Maybank president and CEO Datuk Seri Abdul Wahid Omar said the group’s management was confident of a significantly improved performance in FY10, driven by the economic recovery and broad-based growth.

“FY09 was a challenging year for Maybank for three reasons. Firstly, we had to deal with the global financial crisis, which ultimately affected the global economy and to that extent, Malaysia has not been spared from an economic perspective.

“Secondly, we had to deal with various issues surrounding our three major acquisitions, in BII, MCB Bank Ltd and An Binh Bank.

Abdul Wahid (left) and CFO Khairussaleh Ramli at the press conference to announce Maybank’s financial results yesterday. Photo by Mohd Izwan Mohd Nazam

“Thirdly, we had to raise significant long-term capital, both in the form of debt and equity, totalling some RM15.1 billion, in a very challenging environment,” Maybank president and CEO Datuk Seri Abdul Wahid Omar told reporters here yesterday.

In 4QFY09, the bank posted a RM1.12 billion net loss, against a RM703.21 million net profit in 4QFY08. Revenue rose 8.24% to RM4.86 billion.

The bank had acquired BII, a 20% stake in Pakistan’s MCB Bank and 15% in Vietnam’s An Binh Bank last year. Wahid said Maybank was awaiting approval from Vietnam’s prime minister for it to raise its stake in An Binh Bank to 20%, which could be forthcoming in the next two weeks.

The group’s FY09 performance was hit by an impairment charge of RM1.62 billion on goodwill of the group from BII’s operations and an impairment loss of RM353 million in MCB.

However, Wahid said based on its purchase price allocation exercise undertaken in accordance with Financial Reporting Standard 3 (FRS3, for business combination), and FRS 138 (intangible assets guidelines), in relation to its BII and MCB acquisitions, Maybank did not expect to make any further impairments on the acquisitions.

On why the banking group’s core net profit for FY09 was lower than FY08’s RM2.93 billion, even after stripping out the impairment charges, Wahid said this was due to a RM445 million interest charge on its issuance of RM9.1 billion in capital securities and subordinated debt, higher loan loss provisions, slower capital market activities and lower income from its insurance arm.

Its loan loss provisions were 109.7% higher, at RM1.7 billion, due to higher provisions of RM401.4 million at Maybank, RM121.2 million at its subsidiaries, and from the consolidation of BII’s loan loss provisions for the first time in FY09, by RM366.2 million.

Despite the higher provisions, the group achieved higher loan loss coverage in FY09, which stood at 112.9% as at June 30, compared with 101.1% in FY08.

Also, notwithstanding its various setbacks, the banking group posted a 9% higher net interest income of RM5.92 billion in FY09, driven by higher loans growth and improved lending margins in BII. Its net interest margins, meanwhile, remained relatively stable at 2.72%.

Non-interest income grew to RM3.38 billion in FY09 from RM3.17 billion in FY08. Overhead costs, however, grew to RM5.56 billion from RM4.25 billion, which also included RM584 million overhead costs from BII.

Loans growth at its Malaysian operations rose 6.4%, while overseas loans grew 28.9%. Asset quality continued to improve, with its net non-performing loan (NPL) ratio declining to 1.64% as at June 30, from 1.92% in June 2008.

Wahid said while Maybank had braced for a deterioration in asset quality, it had also taken steps to ensure it did not occur or worsen. He added that while it remained cautious on any uptick in NPLs, it was expected to be manageable.

He also said it could see higher NPLs from small and medium-sized enterprises, but the ratio was not expected to go beyond 2%.

Its core capital ratio and risk-weighted capital ratio, after deducting dividend payable, stood at 10.81% and 14.81%, respectively.

Of its international portfolio, the Singapore operations accounted for 61.9% of total loans, followed by Indonesia with 19.6%.

Pre-tax profit at its Singapore arm grew 5.9% to S$247.7 million, driven by a 24.2% increase in fund-based income. Provisions there rose 42.7%, but the gross NPL ratio decreased to 1%.

MCB reported a pre-tax profit of RM92.4 million, as total income grew 34.5% while its gross NPL ratio stood at 7.6%.

BII has yet to announce its results for the period ended June 30, 2009, but Wahid said the Indonesian bank had made a small contribution to the group’s FY09 results.

On Maybank’s plans for BII, he said with its full management team and growth strategies now in place, it was expected to be profitable in the future.

Wahid said after the bank had turned around its motor financing business this year, it could focus on strengthening its consumer, SME and corporate banking segments.

Meanwhile, on the group’s LEAP30 transformation plan embarked upon last year, he said as at end-June, total financial benefits from the initiatives amounted to RM40 million in pre-tax profit contribution, in addition to RM143 million cost savings.

Wahid said Maybank would launch four more initiatives before year-end, following the 16 launched earlier.

The new measures were the upgrading of its commercial banking model, strengthening of its equity capital markets, brokerage and merger and acquisition capabilities, establishing governance and operating model for its international businesses, and capturing value from BII, he said.

He added that beyond its domestic operations, it would focus on driving performance at BII, with particular emphasis on loans growth in the fast-growing Indonesian economy. He noted that the banking industry there had traditionally grown at a faster rate than the gross domestic product.

http://www.theedgemalaysia.com/business-news/148087-maybank-sees-much-better-fy10.html