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How I Analyze a Bank Stock
How I Analyze a Bank Stock
A four-part framework to clarify banking.
Anand Chokkavelu (TMFBomb) Apr 29, 2014
Here's the beauty of the banking industry: Banks are similar enough that once you learn how to analyze one, you're pretty much set to analyze 500 of them.
That's about how many banks trade on major U.S. exchanges.
Now, the details get messy when you factor in complicated financial instruments, heavy regulations, byzantine operating structures, arcane accounting rules, the macro factors driving the local economies these banks operate in, and intentionally vague jargon.
But at their core, each bank borrows money at one interest rate and then lends it out at a higher interest rate, pocketing the spread between the two.
And as investors we can get far by focusing on four things:
To give a concrete example, let's walk through one of the banks I've bought in the banking-centric real-money portfolio I manage for the Motley Fool: Fifth Third Bancorp (NASDAQ:FITB).
As quick background, Fifth Third is a regional bank based out of Cincinnati whose 1,300+ branches fan out across 12 states. It's large enough to be in the "too big to fail" group that gets stress tested by the Fed each year but still less than a tenth the size of a Bank of America or a Citigroup -- and much simpler.
Alright, let's start with...
1. What the bank actually does
When you read through a bank's earnings releases, it's easy to get sidetracked by management's platitudes and high-minded promises -- guess what, EVERY bank says it's customer-focused and a conservative lender!
Words are nice, but in banking, you are your assets -- the loans you make, the securities you hold, etc. They're the things that will drive future profitability when they're chosen carefully, and they're the things that will force you to fail (or get bailed out) when you get in trouble.
Here's the asset portion of Fifth Third's balance sheet. Take a look, let your eyes glaze over, and then I'll let you know the numbers I focus on (until we get to the "Its price" section, I'm using the financials from Fifth Third's last 10-K because they're more detailed for illustrative purposes).
Loans are the heart of a traditional bank.
In my mind, the greater a bank's loans as a percentage of assets, the closer it is to a prototypical bank.
In this case, two-thirds of Fifth Third's assets are loans (87,032/130,443). This number can range far and wide, but Fifth Third's ratio is pretty typical. For context, note that Fifth Third's loan percentage is double the much more complex balance sheet of JPMorgan Chase.
If a bank isn't holding loans, it's most likely holding securities. You'll notice Fifth Third's various buckets of securities in the balance sheet lines between its cash and its loans. There are many reasons a bank could hold a high percentage of securities.
The next step of digging into the loans is looking at what types of loans a bank makes. You can see in the balance sheet that Fifth Third neatly categorizes its $88.6 billion in loans. Clearly, Fifth Third is a business lender first and foremost: When you add up "Commercial and industrial loans," "Commercial mortgage loans," "Commercial construction loans," and "Commercial leases," almost 60% of Fifth Third's loans are business-related. Also, given the almost $40 billion in "Commercial and industrial loans" (as opposed to mortgage loans), a lot of Fifth Third's loans aren't backed up by real estate (though other forms of collateral may be in play).
For simplicity, I'll stop here. The one-line summary: On the assets side, look at the loans.
Let's move on to the rest of the balance sheet:
Just as the loans tell the story on the assets side, the deposits tell the story on the liabilities side. The prototypical bank takes in deposits and makes loans, so two ratios help get a feel for how prototypical your bank is:
Deposits are great for banks for the same reason you complain about getting low interest rates on your checking and savings accounts. Via these deposit accounts, you're essentially lending the bank money cheaply. If a bank can't attract a lot of deposits, it has to take on debt (or issue stock on the equity side), which is generally much more expensive. That can lead to risky lending behavior -- i.e. chasing yields to justify the costs.
Fifth Third's deposit/liabilities ratio is 86%, which is quite reasonable and leads to an equally reasonable 89% loan/deposit ratio. All of this confirms what we suspected after looking at the loans on the asset side. Fifth Third is a bank that, at its core, takes in deposits and gives out loans with those deposits. If that wasn't the case, we'd want to get comfortable with exactly what it's doing instead.
We're now ready to take a quick peek at the income statement:
The big thing to focus on here is the two different types of bank income:
Still lost in that mess above? See the lines
I told you earlier that at its core, a bank makes money by borrowing at one rate (via deposits and debt) and lending at another higher rate (via loans and securities). Well, net interest income measures that profit.
Meanwhile, noninterest income is the money the bank makes from everything else, such as
For Fifth Third, it gets almost as much income via noninterest means ($3.2 billion) as it does from interest ($3.3 billion).
Like most of what we've covered so far, that's not necessarily good or bad. It furthers our understanding of Fifth Third's business model. For instance, the noninterest income can smooth interest rate volatility but it can also be a risk if regulators change the rules (e.g. banks can no longer automatically opt you in to overdraft protection...meaning they get less of those annoying but lucrative overdraft fees).
There are many, many line items I'm glossing over on both the balance sheet and the income statement, but these are the main things I focus on when I'm looking over the financial statements. As you'll see, many of the things I've ignored are covered a bit by the ratios we'll look at in the other sections.
Next up is...
2. Its price
The oversimplified saying in banking is "buy at half of book value, sell at two times book value."
Just as if I told you to "buy a stock if its P/E ratio is below 10, sell if it's over 25" there are many nuanced pitfalls here, but it at least points you in the right direction.
If you're unfamiliar with book value, it's just another way of saying equity. If a bank is selling at book value, that means you're buying it at a price equal to its equity (i.e. its assets minus its liabilities).
To get a little more conservative and advanced than price/book ratio, we can look at the price/tangible book ratio. As its name implies, this ratio goes a step further and strips out a bank's intangible assets, such as goodwill. Think about it. A bank that wildly overpays to buy another bank would add a bunch of goodwill to its assets -- and boost its equity. By refusing to give credit to that goodwill, we're being more conservative in what we consider a real asset (you can't sell goodwill in a fire sale). Hence, the price-to-tangible book value will always be at least as high as the price-to-book ratio.
In Fifth Third's case, it currently has a price-to-book value of 1.3 and a price-to-tangible book value of 1.5. In today's market that's a slight premium to the median bank.
Like any company, the reason you'd be willing to pay more for one bank than another is if you think its earning power is greater, more growth-y, and less risky.
Our first clue on Fifth Third's earnings power is also our last valuation metric: P/E ratio. Fifth Third's clocks in at just 10.7 times earnings. That's lower than its peers. In other words, although we're paying an above average amount for its book value, we're seeing that it's able to turn its equity into quite a bit of earnings.
Let's look further into that...
3. Its earnings power
I talked a bit about how Fifth Third has a lower than average P/E ratio (high Earnings Yield) despite having a higher-than-average P/B ratio. The metric that bridges that gap is called return on equity (ROE). Put another way, return on equity shows you how well a bank turns its equity into earnings. Equity's ultimately not very useful if it can't be used to make earnings.
Over the long term, an ROE of 10% is solid. Currently, Fifth Third is at 12.3%, which is quite good on both a relative and absolute basis.
Breaking earnings power down further, you can look at
Net interest margin measures how profitably a bank is making investments. It takes the interest a bank makes on its loans and securities, subtracts out the interest it pays on deposits and debt, and divides it all over the value of those loans and securities. In general, it's notable if a bank's net interest margin is
While net interest margin gives you a feel for how well a bank is doing on the interest-generating side, a bank's efficiency ratio, as its name suggests, gives you a feel for how efficiently it's running its operations.
The efficiency ratio takes the non-interest expenses (salaries, building costs, technology, etc.) and divides them into revenue. So, the lower the better.
Fifth Third is at a good 58%.
There are nuances in all this, of course. For instance, a bank may have an unfavorable efficiency ratio because it is investing to create a better customer service atmosphere as part of its strategy to boost revenues and expand net interest margins over the long term.
Meanwhile, ROE and net interest margins can be juiced by taking more risk.
So that brings us to...
4. The amount of risk it's taking to achieve that earnings power
There are a lot (and I mean a LOT) of ratios that try to measure how risky a bank's balance sheet is. For example, when the Fed does its annual stress test of the largest banks, it looks at these five:
If you think that's confusing, you should see their definitions -- they're chockfull of terms like "qualifying non-cumulative perpetual preferred stock instruments."
Personally, I rely on a much simpler ratio: assets/equity.
When you buy a house using a 20% down payment (that's your equity), your assets/equity ratio is at five (your house's value divided by your down payment).
For a bank, I get comfort from a ratio that's at 10 or lower. My worry increases the farther above 10 we go. Fifth Third's is at a reasonable 8.7 after its most recent quarter (8.9 if you're doing the math on the year-end balance sheet above).
We can get more complicated by using tangible equity, but this is a good basic leverage ratio to check out. If you're looking at a bigger bank like Fifth Third, it's also a good idea to check out the results of those Fed stress tests I talked about.
That leverage ratio gives us a good high-level footing. Getting deeper into assessing assets, we need to look at the strength of the loans. Let's focus on two metrics for this:
Non-performing loans are loans that are behind on payment for a certain period of time (90 days is usually the threshold). That's a bad thing for obvious reasons.
Like most of these metrics, it really depends on the economic environment for what a reasonable bad loan percentage is.
Banks know that not every loan will get paid back, so they take an earnings hit early and establish an allowance for bad loans. As you've probably guessed, banks can play a lot of games with this allowance.
Finally, I use dividends as an additional comfort point. In an industry that has periods that incent loose lending, I like management consistently taking some capital out of its own hands. I like to see banks paying at least a two percent dividend. A bigger dividend isn't a foolproof way to gauge riskiness, but I get warm fuzzies from a bank that can commit to a decent-sized dividend. As for Fifth Third, it pays out about a quarter of its earnings for a dividend yield of 2.3%.
Putting it all together
I've tried to simplify analyzing a bank as much as I can. I've left out many metrics and concepts, but you've still been bombarded with a lot of potentially boring information.
What's important to remember is that a bank (through its management) is telling you a story about itself. It's our job to figure out whether we believe the tale enough to buy it at current prices.
Because most banks share similar business models, the numbers will go a long way to help you determine if those stories hold water.
If a bank says it's a conservative lender, but half of its loans are construction loans, it has a 10% bad debt ratio, and it's leveraged 20:1, I'm trusting the numbers not the words.
Look at the numbers over the last decade or two and you'll see many clues. When a bank has been able to deliver large returns across a few economic cycles while keeping the same general business model, that's a very good thing. Even better if the same management team has been there the whole time or if the bank clearly has a conservative culture in place that stays in place between management teams.
It's easy to get lost in the minutiae of analyzing a bank, but going in with a framework helps you keep your eyes on the big picture. What I've shared today are the four tenets of my basic framework...I hope it helps clarify yours.
Anand Chokkavelu, CFA owns shares of Bank of America, Citigroup, and Fifth Third Bancorp as well as warrants in Citigroup. He swears his other articles are more interesting. The Motley Fool recommends Bank of America. The Motley Fool owns shares of Bank of America, Citigroup, and Fifth Third Bancorp. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
http://www.fool.com/investing/general/2014/04/29/how-i-analyze-a-bank-stock.aspx
A four-part framework to clarify banking.
Anand Chokkavelu (TMFBomb) Apr 29, 2014
Here's the beauty of the banking industry: Banks are similar enough that once you learn how to analyze one, you're pretty much set to analyze 500 of them.
That's about how many banks trade on major U.S. exchanges.
Now, the details get messy when you factor in complicated financial instruments, heavy regulations, byzantine operating structures, arcane accounting rules, the macro factors driving the local economies these banks operate in, and intentionally vague jargon.
But at their core, each bank borrows money at one interest rate and then lends it out at a higher interest rate, pocketing the spread between the two.
And as investors we can get far by focusing on four things:
- What the bank actually does
- Its price
- Its earnings power
- The amount of risk it's taking to achieve that earnings power
To give a concrete example, let's walk through one of the banks I've bought in the banking-centric real-money portfolio I manage for the Motley Fool: Fifth Third Bancorp (NASDAQ:FITB).
As quick background, Fifth Third is a regional bank based out of Cincinnati whose 1,300+ branches fan out across 12 states. It's large enough to be in the "too big to fail" group that gets stress tested by the Fed each year but still less than a tenth the size of a Bank of America or a Citigroup -- and much simpler.
Alright, let's start with...
1. What the bank actually does
When you read through a bank's earnings releases, it's easy to get sidetracked by management's platitudes and high-minded promises -- guess what, EVERY bank says it's customer-focused and a conservative lender!
Words are nice, but in banking, you are your assets -- the loans you make, the securities you hold, etc. They're the things that will drive future profitability when they're chosen carefully, and they're the things that will force you to fail (or get bailed out) when you get in trouble.
Here's the asset portion of Fifth Third's balance sheet. Take a look, let your eyes glaze over, and then I'll let you know the numbers I focus on (until we get to the "Its price" section, I'm using the financials from Fifth Third's last 10-K because they're more detailed for illustrative purposes).
Loans are the heart of a traditional bank.
In my mind, the greater a bank's loans as a percentage of assets, the closer it is to a prototypical bank.
In this case, two-thirds of Fifth Third's assets are loans (87,032/130,443). This number can range far and wide, but Fifth Third's ratio is pretty typical. For context, note that Fifth Third's loan percentage is double the much more complex balance sheet of JPMorgan Chase.
If a bank isn't holding loans, it's most likely holding securities. You'll notice Fifth Third's various buckets of securities in the balance sheet lines between its cash and its loans. There are many reasons a bank could hold a high percentage of securities.
- For example, its business model may not be loan-driven,
- it may be losing loan business to other banks, or
- it may just be being conservative when it can't find favorable loan terms.
The next step of digging into the loans is looking at what types of loans a bank makes. You can see in the balance sheet that Fifth Third neatly categorizes its $88.6 billion in loans. Clearly, Fifth Third is a business lender first and foremost: When you add up "Commercial and industrial loans," "Commercial mortgage loans," "Commercial construction loans," and "Commercial leases," almost 60% of Fifth Third's loans are business-related. Also, given the almost $40 billion in "Commercial and industrial loans" (as opposed to mortgage loans), a lot of Fifth Third's loans aren't backed up by real estate (though other forms of collateral may be in play).
For simplicity, I'll stop here. The one-line summary: On the assets side, look at the loans.
Let's move on to the rest of the balance sheet:
Just as the loans tell the story on the assets side, the deposits tell the story on the liabilities side. The prototypical bank takes in deposits and makes loans, so two ratios help get a feel for how prototypical your bank is:
- 1) Deposits/Liabilities
- 2) Loans/Deposits.
Deposits are great for banks for the same reason you complain about getting low interest rates on your checking and savings accounts. Via these deposit accounts, you're essentially lending the bank money cheaply. If a bank can't attract a lot of deposits, it has to take on debt (or issue stock on the equity side), which is generally much more expensive. That can lead to risky lending behavior -- i.e. chasing yields to justify the costs.
Fifth Third's deposit/liabilities ratio is 86%, which is quite reasonable and leads to an equally reasonable 89% loan/deposit ratio. All of this confirms what we suspected after looking at the loans on the asset side. Fifth Third is a bank that, at its core, takes in deposits and gives out loans with those deposits. If that wasn't the case, we'd want to get comfortable with exactly what it's doing instead.
We're now ready to take a quick peek at the income statement:
The big thing to focus on here is the two different types of bank income:
- net interest income and
- (you guessed it) noninterest income.
Still lost in that mess above? See the lines
- "Net Interest Income After Provision for Loan and Lease Losses" (3,332, or $3.332 billion) and
- "Total noninterest income" (3,227, or $3.227 billion).
I told you earlier that at its core, a bank makes money by borrowing at one rate (via deposits and debt) and lending at another higher rate (via loans and securities). Well, net interest income measures that profit.
Meanwhile, noninterest income is the money the bank makes from everything else, such as
- fees on mortgages,
- fees and penalties on credit cards,
- charges on checking and savings accounts, and
- fees on services like investment advice for individuals and corporate banking for businesses.
For Fifth Third, it gets almost as much income via noninterest means ($3.2 billion) as it does from interest ($3.3 billion).
Like most of what we've covered so far, that's not necessarily good or bad. It furthers our understanding of Fifth Third's business model. For instance, the noninterest income can smooth interest rate volatility but it can also be a risk if regulators change the rules (e.g. banks can no longer automatically opt you in to overdraft protection...meaning they get less of those annoying but lucrative overdraft fees).
There are many, many line items I'm glossing over on both the balance sheet and the income statement, but these are the main things I focus on when I'm looking over the financial statements. As you'll see, many of the things I've ignored are covered a bit by the ratios we'll look at in the other sections.
Next up is...
2. Its price
The oversimplified saying in banking is "buy at half of book value, sell at two times book value."
Just as if I told you to "buy a stock if its P/E ratio is below 10, sell if it's over 25" there are many nuanced pitfalls here, but it at least points you in the right direction.
If you're unfamiliar with book value, it's just another way of saying equity. If a bank is selling at book value, that means you're buying it at a price equal to its equity (i.e. its assets minus its liabilities).
To get a little more conservative and advanced than price/book ratio, we can look at the price/tangible book ratio. As its name implies, this ratio goes a step further and strips out a bank's intangible assets, such as goodwill. Think about it. A bank that wildly overpays to buy another bank would add a bunch of goodwill to its assets -- and boost its equity. By refusing to give credit to that goodwill, we're being more conservative in what we consider a real asset (you can't sell goodwill in a fire sale). Hence, the price-to-tangible book value will always be at least as high as the price-to-book ratio.
In Fifth Third's case, it currently has a price-to-book value of 1.3 and a price-to-tangible book value of 1.5. In today's market that's a slight premium to the median bank.
Like any company, the reason you'd be willing to pay more for one bank than another is if you think its earning power is greater, more growth-y, and less risky.
Our first clue on Fifth Third's earnings power is also our last valuation metric: P/E ratio. Fifth Third's clocks in at just 10.7 times earnings. That's lower than its peers. In other words, although we're paying an above average amount for its book value, we're seeing that it's able to turn its equity into quite a bit of earnings.
Let's look further into that...
3. Its earnings power
I talked a bit about how Fifth Third has a lower than average P/E ratio (high Earnings Yield) despite having a higher-than-average P/B ratio. The metric that bridges that gap is called return on equity (ROE). Put another way, return on equity shows you how well a bank turns its equity into earnings. Equity's ultimately not very useful if it can't be used to make earnings.
Over the long term, an ROE of 10% is solid. Currently, Fifth Third is at 12.3%, which is quite good on both a relative and absolute basis.
Breaking earnings power down further, you can look at
- net interest margin and
- efficiency.
Net interest margin measures how profitably a bank is making investments. It takes the interest a bank makes on its loans and securities, subtracts out the interest it pays on deposits and debt, and divides it all over the value of those loans and securities. In general, it's notable if a bank's net interest margin is
- below 3% (not good) or
- above 4% (quite good).
While net interest margin gives you a feel for how well a bank is doing on the interest-generating side, a bank's efficiency ratio, as its name suggests, gives you a feel for how efficiently it's running its operations.
The efficiency ratio takes the non-interest expenses (salaries, building costs, technology, etc.) and divides them into revenue. So, the lower the better.
- A reading below 50% is the gold standard.
- A reading above 70% could be cause for concern.
Fifth Third is at a good 58%.
There are nuances in all this, of course. For instance, a bank may have an unfavorable efficiency ratio because it is investing to create a better customer service atmosphere as part of its strategy to boost revenues and expand net interest margins over the long term.
Meanwhile, ROE and net interest margins can be juiced by taking more risk.
So that brings us to...
4. The amount of risk it's taking to achieve that earnings power
There are a lot (and I mean a LOT) of ratios that try to measure how risky a bank's balance sheet is. For example, when the Fed does its annual stress test of the largest banks, it looks at these five:
- Tier 1 common ratio
- Common equity tier 1 ratio
- Tier 1 risk-based capital ratio
- Total risk-based capital ratio
- Tier 1 leverage ratio.
If you think that's confusing, you should see their definitions -- they're chockfull of terms like "qualifying non-cumulative perpetual preferred stock instruments."
Personally, I rely on a much simpler ratio: assets/equity.
When you buy a house using a 20% down payment (that's your equity), your assets/equity ratio is at five (your house's value divided by your down payment).
For a bank, I get comfort from a ratio that's at 10 or lower. My worry increases the farther above 10 we go. Fifth Third's is at a reasonable 8.7 after its most recent quarter (8.9 if you're doing the math on the year-end balance sheet above).
We can get more complicated by using tangible equity, but this is a good basic leverage ratio to check out. If you're looking at a bigger bank like Fifth Third, it's also a good idea to check out the results of those Fed stress tests I talked about.
That leverage ratio gives us a good high-level footing. Getting deeper into assessing assets, we need to look at the strength of the loans. Let's focus on two metrics for this:
- Bad loan percentage (Non-performing Loans/Total Loans)
- Coverage of bad loans (Allowance for non-performing loans/Non-performing loans)
Non-performing loans are loans that are behind on payment for a certain period of time (90 days is usually the threshold). That's a bad thing for obvious reasons.
Like most of these metrics, it really depends on the economic environment for what a reasonable bad loan percentage is.
- During the housing crash, bad loan percentages above five percent weren't uncommon.
- In general, though, I take notice when a bank's bad loans exceed two percent of loans.
- I get excited when the bad loan percentage gets below one percent (so Fifth Third's 0.8% is looking good).
Banks know that not every loan will get paid back, so they take an earnings hit early and establish an allowance for bad loans. As you've probably guessed, banks can play a lot of games with this allowance.
- Specifically, they can boost their current earnings by not provisioning enough for loans that will eventually default.
- That's why I like to see the coverage of bad loans to be at least 100%. Fifth Third's is at a conservative-looking 202%.
Finally, I use dividends as an additional comfort point. In an industry that has periods that incent loose lending, I like management consistently taking some capital out of its own hands. I like to see banks paying at least a two percent dividend. A bigger dividend isn't a foolproof way to gauge riskiness, but I get warm fuzzies from a bank that can commit to a decent-sized dividend. As for Fifth Third, it pays out about a quarter of its earnings for a dividend yield of 2.3%.
Putting it all together
I've tried to simplify analyzing a bank as much as I can. I've left out many metrics and concepts, but you've still been bombarded with a lot of potentially boring information.
What's important to remember is that a bank (through its management) is telling you a story about itself. It's our job to figure out whether we believe the tale enough to buy it at current prices.
Because most banks share similar business models, the numbers will go a long way to help you determine if those stories hold water.
If a bank says it's a conservative lender, but half of its loans are construction loans, it has a 10% bad debt ratio, and it's leveraged 20:1, I'm trusting the numbers not the words.
Look at the numbers over the last decade or two and you'll see many clues. When a bank has been able to deliver large returns across a few economic cycles while keeping the same general business model, that's a very good thing. Even better if the same management team has been there the whole time or if the bank clearly has a conservative culture in place that stays in place between management teams.
It's easy to get lost in the minutiae of analyzing a bank, but going in with a framework helps you keep your eyes on the big picture. What I've shared today are the four tenets of my basic framework...I hope it helps clarify yours.
Anand Chokkavelu, CFA owns shares of Bank of America, Citigroup, and Fifth Third Bancorp as well as warrants in Citigroup. He swears his other articles are more interesting. The Motley Fool recommends Bank of America. The Motley Fool owns shares of Bank of America, Citigroup, and Fifth Third Bancorp. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
http://www.fool.com/investing/general/2014/04/29/how-i-analyze-a-bank-stock.aspx
Thursday, 22 August 2013
Maybank Q2 net profit soars to RM1.57b
Kuala Lumpur: Malayan Banking Bhd (Maybank), the country’s biggest lender, said yesterday second-quarter profit rose nine per cent, driven by higher lending and broking income.
Maybank’s revenue for the period was up 9.5 per cent to RM8.68 billion against RM7.93 billion a year earlier, while earnings per share was 18.23 sen compared with 18.65 sen before.
For the six-month period, Maybank posted a 10.4 per cent net profit to RM3.07 billion while revenue grew to RM16.91 billion against RM15.8 billion a year earlier.
“Our results have been strong due to our well-diversified portfolio and focus to improve performance despite the challenging external environment,” Maybank chairman Tan Sri Megat Zaharuddin Megat Mohd Nor said at a press conference, here, yesterday.
“We are confident of further solidifying this position.”
Maybank declared an interim dividend of 22.5 sen a share, of which 6.5 sen is payable by cash and 16 sen can be reinvested in new ordinary shares. This represents a total payout of 63.7 per cent of group Patami (profit after tax and minority interest) for the period.
The bank’s net fund-based income in the first half rose 8.2 per cent to RM5.75 billion, supported by robust growth in global banking division (20.2 per cent) and community financial services (10.1 per cent).
Amid subdued operating environment, the group’s loan growth in the first half expanded to 9.1 per cent, thanks to the huge improvement in the local market. Second-quarter loan growth rose to 13.4 per cent against 5.3 per cent in the preceding quarter, exceeding industry’s benchmark of 10.1 per cent.
Fund-based income surged eight per cent from a year earlier, boosted by investment portfolio’s gains, higher trading income, especially record brokerage revenue in Thailand, coupled with rising commission, service charges and fees.
Helmed by new chief executive officer Datuk Abdul Farid Alias, Maybank is set to continue to accelerate regional expansion to enhance its portfolio.
With this in mind, Maybank will consider the setting up of a commercial bank in Thailand, Abdul Farid said.
"We are not rushing to make a decision until the deal makes sense to our shareholders," he said.
The bank has presence in Thailand via Maybank Kim Eng, the largest brokerage firm there.
It also holds a controlling stake in PT Bank Internasional Indonesia and Singapore brokerage Kim Eng Holdings.
Maybank is seeking a higher overseas operations profit contribution of 40 per cent from 31.5 per cent currently.
The bank is also on track to meet its two headline key performance indicators of return on equity of 15 per cent and 12 per cent loan growth in financial year 2013.
Read more: Maybank Q2 net profit soars to RM1.57b http://www.btimes.com.my/Current_News/BTIMES/articles/20130822002210/Article/index_html#ixzz2cgQy8X3E
Net income climbed to a record RM1.57 billion in the three months ended June 30 from RM1.44 billion a year earlier.
Maybank’s revenue for the period was up 9.5 per cent to RM8.68 billion against RM7.93 billion a year earlier, while earnings per share was 18.23 sen compared with 18.65 sen before.
For the six-month period, Maybank posted a 10.4 per cent net profit to RM3.07 billion while revenue grew to RM16.91 billion against RM15.8 billion a year earlier.
“Our results have been strong due to our well-diversified portfolio and focus to improve performance despite the challenging external environment,” Maybank chairman Tan Sri Megat Zaharuddin Megat Mohd Nor said at a press conference, here, yesterday.
 |
Maybank declared an interim dividend of 22.5 sen a share, of which 6.5 sen is payable by cash and 16 sen can be reinvested in new ordinary shares. This represents a total payout of 63.7 per cent of group Patami (profit after tax and minority interest) for the period.
The bank’s net fund-based income in the first half rose 8.2 per cent to RM5.75 billion, supported by robust growth in global banking division (20.2 per cent) and community financial services (10.1 per cent).
Amid subdued operating environment, the group’s loan growth in the first half expanded to 9.1 per cent, thanks to the huge improvement in the local market. Second-quarter loan growth rose to 13.4 per cent against 5.3 per cent in the preceding quarter, exceeding industry’s benchmark of 10.1 per cent.
Fund-based income surged eight per cent from a year earlier, boosted by investment portfolio’s gains, higher trading income, especially record brokerage revenue in Thailand, coupled with rising commission, service charges and fees.
Helmed by new chief executive officer Datuk Abdul Farid Alias, Maybank is set to continue to accelerate regional expansion to enhance its portfolio.
With this in mind, Maybank will consider the setting up of a commercial bank in Thailand, Abdul Farid said.
"We are not rushing to make a decision until the deal makes sense to our shareholders," he said.
The bank has presence in Thailand via Maybank Kim Eng, the largest brokerage firm there.
It also holds a controlling stake in PT Bank Internasional Indonesia and Singapore brokerage Kim Eng Holdings.
Maybank is seeking a higher overseas operations profit contribution of 40 per cent from 31.5 per cent currently.
The bank is also on track to meet its two headline key performance indicators of return on equity of 15 per cent and 12 per cent loan growth in financial year 2013.
Read more: Maybank Q2 net profit soars to RM1.57b http://www.btimes.com.my/Current_News/BTIMES/articles/20130822002210/Article/index_html#ixzz2cgQy8X3E
Friday, 22 June 2012
Investor's Checklist: Banks
The business model of banks can be summed up as the management of three types of risk: credit, liquidity, and interest rate.
Investors should focus on conservatively run institutions. They should seek out firms that hold large equity bases relative to competitors and provision conservatively for future loan losses
Different components of banks' income statements can show volatile swings depending on a number of factors such as the interest rate and credit environment. However, well-run banks should generally show steady net income growth through varying environments. Investors are well served to seek out firms with a good track record.
Well-run banks focus heavily on matching the duration of assets with the duration of liabilities. For instance, banks should fund long-term loans with liabilities such as long-term debt or deposits, not short-term funding. Avoid lenders that don't.
Banks have numerous competitive advantages. They can borrow money at rates lower than even the federal government. There are large economies of scale in this business derived from having an established distribution network. the capital-intensive nature of banking deters new competitors. Customer-switching costs are high, and there are limited barriers to exit money-losing endeavors.
Investors should seek out banks with a strong equity base, consistently solid ROEs and ROAs, and an ability to grow revenues at a steady pace.
Comparing similar banks on a price-to-book measure can be a good way to make sure you're not overpaying for a bank stock.
Ref: The Five Rules to Successful Stock Investing by Pat Dorsey
Read also:
Investor's Checklist: A Guided Tour of the Market...
Investors should focus on conservatively run institutions. They should seek out firms that hold large equity bases relative to competitors and provision conservatively for future loan losses
Different components of banks' income statements can show volatile swings depending on a number of factors such as the interest rate and credit environment. However, well-run banks should generally show steady net income growth through varying environments. Investors are well served to seek out firms with a good track record.
Well-run banks focus heavily on matching the duration of assets with the duration of liabilities. For instance, banks should fund long-term loans with liabilities such as long-term debt or deposits, not short-term funding. Avoid lenders that don't.
Banks have numerous competitive advantages. They can borrow money at rates lower than even the federal government. There are large economies of scale in this business derived from having an established distribution network. the capital-intensive nature of banking deters new competitors. Customer-switching costs are high, and there are limited barriers to exit money-losing endeavors.
Investors should seek out banks with a strong equity base, consistently solid ROEs and ROAs, and an ability to grow revenues at a steady pace.
Comparing similar banks on a price-to-book measure can be a good way to make sure you're not overpaying for a bank stock.
Ref: The Five Rules to Successful Stock Investing by Pat Dorsey
Read also:
Investor's Checklist: A Guided Tour of the Market...
Wednesday, 7 December 2011
Maybank assets under custody set to grow 20%
Wednesday December 7, 2011
KUALA LUMPUR: Malayan Banking Bhd (Maybank) expects its new eCustody service to grow assets under custody by 20% next year, from RM50bil at June 30 this year.
eCustody is an online module within Maybank’s enterprise cash management portal, Maybank2E.net.
Deputy president and head of global wholesale banking Abdul Farid Alias said that Maybank’s local and international assets under custody stood at RM37bil at June 30, 2010.
“Transaction banking services are a growing revenue driver for the Maybank group. In the financial year ended June 30, 2011, transaction banking revenue grew 9% (and) custody services recorded growth of 10% for the past five years.
Revenue driver: Wong (left) and Farid at the launch of eCustody, which is expected to increase Maybank’s custody services revenue by at least 20%.“Now, we are expecting revenue from custody services to grow by at least 20% in the coming year with eCustody,” Farid said at the launch of eCustody.
He said Maybank had been putting up building blocks and that the new service provided the final link for the group to provide a complete, single platform for electronic transaction banking.
Farid said the bank currently had 126 custody clients and expected to convert 60% of them to the eCustody platform by end-2012.
He said Maybank already had a sizeable presence in trade finance with a market share, in terms of volume, of 24% and 30% in cash management.
Managing director (transaction banking, global wholesale banking) John Wong explained that eCustody was already iPad-enabled and that the next phase would be introduced in March for BlackBerry and Android-based devices.
Wong assured that eCustody was a secure system, saying it required dual authentication whereby a client would be given a “token” that generates a password on top of his password.
He said eCustody would be one of the enablers for Maybank to take its electronic transaction banking platform regional. The system, Wong said, had gone live in Cambodia and was being planned for roll-out in Indonesia and Singapore next year.
He said Indonesia would be enabled with eCustody by June 2012, followed by Singapore and subsequently Greater China to cater to key Asean market.
Farid said owing to the bank’s extensive network in the region, it saw an opportunity to extend its electronic transaction banking services regionally. “This will incorporate not only custody services but also cash management and trade finance via a single platform.”
Monday, 25 April 2011
Tuesday, 18 January 2011
Pos Malaysia, Maybank partner to offer shared banking services
Pos Malaysia, Maybank partner to offer shared banking services
Written by Surin Murugiah of theedgemalaysia.com
Friday, 14 January 2011 19:16
KUALA LUMPUR: POS MALAYSIA BHD [] and MALAYAN BANKING BHD [] have teamed up to provide shared banking convenience for their customers at more than 400 Pos Malaysia outlets.
In the agreement signed on Friday, Jan 14, they said the alliance would enable the bank to provide banking services to more customers, especially the underserved segment, through the extensive network of Pos Malaysia’s outlets. The partnership would enable Maybank to especially reach the rural areas of Sabah and Sarawak.
Pos Malaysia group managing director and chief executive officer Datuk Syed Faisal Albar said Pos Malaysia was always looking for opportunities to expand the range of products and services offered at its post office counters such as the shared banking services with Maybank.
Maybank president & CEO Datuk Seri Abdul Wahid Omar said the collaboration reaffirmed Maybank’s market leadership and capabilities to offer services to all communities. This would also reinforce its corporate social responsibility and focus on supporting communities especially in the rural areas.
“It is about providing access to financial services and to improve quality of life of the community as well as contribute to the development of the people where we have our presence.
“The initiative is also in line with Maybank’s spirit in humanising financial services from the heart of Asean by providing easy access to financial service for the people, as well as providing them with a fair term and pricing and for us to be the heart of the community,” he added.
The three phase implementation programme will see selected Pos Malaysia outlets offer Maybank customers to undertake over the counter bank transactions such as cash deposit and withdrawal for savings account holders and loan repayments in the initial stage.
An automated teller machine would be provided at selected Pos Malaysia outlets to offer banking convenience beyond banking hours as well as additional services such as fund transfer, top-up of mobile credits or 'Touch 'n Go’ card.
"By end June 2011, Pos Malaysia services will expand to cover remittance service and opening of savings account," Abdul Wahid said.
Written by Surin Murugiah of theedgemalaysia.com
Friday, 14 January 2011 19:16
KUALA LUMPUR: POS MALAYSIA BHD [] and MALAYAN BANKING BHD [] have teamed up to provide shared banking convenience for their customers at more than 400 Pos Malaysia outlets.
In the agreement signed on Friday, Jan 14, they said the alliance would enable the bank to provide banking services to more customers, especially the underserved segment, through the extensive network of Pos Malaysia’s outlets. The partnership would enable Maybank to especially reach the rural areas of Sabah and Sarawak.
Pos Malaysia group managing director and chief executive officer Datuk Syed Faisal Albar said Pos Malaysia was always looking for opportunities to expand the range of products and services offered at its post office counters such as the shared banking services with Maybank.
Maybank president & CEO Datuk Seri Abdul Wahid Omar said the collaboration reaffirmed Maybank’s market leadership and capabilities to offer services to all communities. This would also reinforce its corporate social responsibility and focus on supporting communities especially in the rural areas.
“It is about providing access to financial services and to improve quality of life of the community as well as contribute to the development of the people where we have our presence.
“The initiative is also in line with Maybank’s spirit in humanising financial services from the heart of Asean by providing easy access to financial service for the people, as well as providing them with a fair term and pricing and for us to be the heart of the community,” he added.
The three phase implementation programme will see selected Pos Malaysia outlets offer Maybank customers to undertake over the counter bank transactions such as cash deposit and withdrawal for savings account holders and loan repayments in the initial stage.
An automated teller machine would be provided at selected Pos Malaysia outlets to offer banking convenience beyond banking hours as well as additional services such as fund transfer, top-up of mobile credits or 'Touch 'n Go’ card.
"By end June 2011, Pos Malaysia services will expand to cover remittance service and opening of savings account," Abdul Wahid said.
Friday, 10 December 2010
Maybank's international operations expected to contribute 40% to group's net profit by 2015
Friday December 10, 2010
Maybank told to sell down stake in Indonesian bank
By LEONG HUNG YEE
hungyee@thestar.com.my
PETALING JAYA: Malayan Banking Bhd's (Maybank) Indonesia unit, PT Bank Internasional Indonesia (BII), saw its shares jump to a 10-year high amid comments by the country's regulator that Maybank refloat a 20% stake in BII within six months.
BII's shares surged 25% yesterday to 1,010 rupiah a piece. Its share price has also appreciated by more than 215% year-to-date.
Yesterday, Bloomberg quoted Indonesia capital market regulator chairman Ahmad Fuad Rahmany who said that Maybank needed to fulfil its sell-down requirement and complete the exercise by June 1, 2011.
Maybank acquired BII in 2008 for RM7.9bil and holds a 97.5% stake. Maybank said last Friday that it had received a letter from the Indonesian Regulatory Authority for Indonesian Capital Market (Bapepam) that gave it an extension of time to June 1, 2011 to complete its sell-down.
But Maybank added then that it may request for further extension if the sell-down exercise would result in it incurring a potential loss in excess of 10% of its original value of the BII acquisition.
While analysts said Maybank could potentially realise a gain from the sale of the 20% stake given the high share price of BII, the problem is likely to be finding potential buyers willing to pay such a high price.
PT Ciptadana Securities head of sales John Teja was quoted by Bloomberg as saying the shares rose on expectation Maybank would sell the stake at a higher price.
MIMB Investment Bank research head Chan Ken Yew said it was a definitely good deal if Maybank could sell its stake at such a high price.
He said Maybank paid a book value of four times when it bought the bank but said that BII's current market price was around 9.9 times its book value.
A local bank-backed head of research said that despite the lofty price of BII, it should be noted that Maybank did a huge write down after the take-over.
He also said that the main reason why Maybank has delayed its sell down of BII shares was because it has not found a buyer willing to pay a price around the current trading price of BII.
It is not easy to find a buyer. Furthermore, I think the Indonesian regulator may not want another Malaysian entity to take up such a big block in BII. Hence Maybank is likely to be looking for an Indonesian partner that could potentially add value to BII, but that's whats taking time, he said.
It is likely that Maybank will place out the shares either to one entity or a group of insitutions. Maybank expects its international operations from countries such as Singapore and Indonesia to contribute 40% to the group's net profit by 2015.
For the nine months ended Sept 30, BII posted a net profit of 415 billion rupiah (US$47mil) despite an earlier significant impairment charge in 2009.
This marked a significant turnaround from a net loss of 183 billion rupiah (US$19mil) in the same period last year.
http://biz.thestar.com.my/news/story.asp?file=/2010/12/10/business/7594718&sec=business
Maybank told to sell down stake in Indonesian bank
By LEONG HUNG YEE
hungyee@thestar.com.my
PETALING JAYA: Malayan Banking Bhd's (Maybank) Indonesia unit, PT Bank Internasional Indonesia (BII), saw its shares jump to a 10-year high amid comments by the country's regulator that Maybank refloat a 20% stake in BII within six months.
BII's shares surged 25% yesterday to 1,010 rupiah a piece. Its share price has also appreciated by more than 215% year-to-date.
Yesterday, Bloomberg quoted Indonesia capital market regulator chairman Ahmad Fuad Rahmany who said that Maybank needed to fulfil its sell-down requirement and complete the exercise by June 1, 2011.
Maybank acquired BII in 2008 for RM7.9bil and holds a 97.5% stake. Maybank said last Friday that it had received a letter from the Indonesian Regulatory Authority for Indonesian Capital Market (Bapepam) that gave it an extension of time to June 1, 2011 to complete its sell-down.
But Maybank added then that it may request for further extension if the sell-down exercise would result in it incurring a potential loss in excess of 10% of its original value of the BII acquisition.
While analysts said Maybank could potentially realise a gain from the sale of the 20% stake given the high share price of BII, the problem is likely to be finding potential buyers willing to pay such a high price.
PT Ciptadana Securities head of sales John Teja was quoted by Bloomberg as saying the shares rose on expectation Maybank would sell the stake at a higher price.
MIMB Investment Bank research head Chan Ken Yew said it was a definitely good deal if Maybank could sell its stake at such a high price.
He said Maybank paid a book value of four times when it bought the bank but said that BII's current market price was around 9.9 times its book value.
A local bank-backed head of research said that despite the lofty price of BII, it should be noted that Maybank did a huge write down after the take-over.
He also said that the main reason why Maybank has delayed its sell down of BII shares was because it has not found a buyer willing to pay a price around the current trading price of BII.
It is not easy to find a buyer. Furthermore, I think the Indonesian regulator may not want another Malaysian entity to take up such a big block in BII. Hence Maybank is likely to be looking for an Indonesian partner that could potentially add value to BII, but that's whats taking time, he said.
It is likely that Maybank will place out the shares either to one entity or a group of insitutions. Maybank expects its international operations from countries such as Singapore and Indonesia to contribute 40% to the group's net profit by 2015.
For the nine months ended Sept 30, BII posted a net profit of 415 billion rupiah (US$47mil) despite an earlier significant impairment charge in 2009.
This marked a significant turnaround from a net loss of 183 billion rupiah (US$19mil) in the same period last year.
http://biz.thestar.com.my/news/story.asp?file=/2010/12/10/business/7594718&sec=business
Friday, 30 July 2010
Maybank sees solid deal flow, eyes new market
Maybank sees solid deal flow, eyes new market
UPDATED @ 01:19:39 PM 27-07-2010 July 27, 2010
KUALA LUMPUR, July 27 — Maybank expects to see a 50 per cent rise in the value of its investment banking deals this year as the stable global economy galvanises fund-raising activities, a senior official said.
Maybank, Malaysia’s largest listed firm, said a healthy flow of initial public offerings and bond issuance would contribute to a strong rise in its equity and debt capital market pipeline from US$3.01 billion (RM9.61 billion) in 2009.
“We’ll see at least 50 per cent growth value wise,” Tengku Zafrul Tengku Aziz said in an interview.
“We have seen positive growth in both the debt capital market and equity capital market. So I think going forward, you will see the similar pattern, we believe that both the debt capital market and the equity capital market will show positive growth in the next six months.”
Maybank Investment’s recent deals include shopping mall operator CapitaMalls Malaysia Trust’s US$266 million IPO and property developer Sunway REIT US$455 million listing exercise.
The investment banking arm of Maybank is also advising on the upcoming listing of shipping firm MISC’s heavy engineering arm which is expected to raise over US$300 million.
Maybank Investment handled US$713 million in equity deals in the year to July 26, making it No. 6 in terms of Southeast Asian bookrunners, behind top-ranked Malaysian bank CIMB Group and JP Morgan, according to Thomson Reuters data.
The bank said it arranged RM7.25 billion of debt deals and RM2.36 billion of equity transactions last year.
Zafrul said prospects for next year were less clear but the investment bank planned to enter the Indonesia and Singapore markets by mid-2011 and was open to taking an equity stake to expand its regional footprint there.
“We are looking at all possible options,” said Zafrul who used to head Citi’s Malaysian investment banking business. “There are three options — to find a partner, to start from scratch, or to do a joint venture.”
He said Maybank Investment had yet to identify potential partners in these markets.
He said the bank planned to boost its staff strength of 580 to keep pace with business growth but did not give projections.
“We are looking at other capabilities such as structured products, futures - these are areas which we have not gone into but plan to go into.”
Maybank is due to report its fourth quarter earnings in August. Twenty-two analysts tracked by Thomson Reuters I/B/E/S expect it to post a net profit of RM3.7 billion ($1.16 billion) for the full year, surpassing its best ever full-year net profit of RM3.18 billion reported in fiscal 2007.
In May, the bank posted a January-March net profit of RM1.03 billion, its best-ever quarterly performance.
Shares of Maybank, which has a market value of US$17 billion, are up 12.24 per cent so far this year, outperforming the 6.2 per cent gain in the broader market index but lagging top dealmaker CIMB’s 16.8 per cent increase. — Reuters
http://www.themalaysianinsider.com/business/article/maybank-sees-solid-deal-flow-eyes-new-market/
UPDATED @ 01:19:39 PM 27-07-2010 July 27, 2010
KUALA LUMPUR, July 27 — Maybank expects to see a 50 per cent rise in the value of its investment banking deals this year as the stable global economy galvanises fund-raising activities, a senior official said.
Maybank, Malaysia’s largest listed firm, said a healthy flow of initial public offerings and bond issuance would contribute to a strong rise in its equity and debt capital market pipeline from US$3.01 billion (RM9.61 billion) in 2009.
“We’ll see at least 50 per cent growth value wise,” Tengku Zafrul Tengku Aziz said in an interview.
“We have seen positive growth in both the debt capital market and equity capital market. So I think going forward, you will see the similar pattern, we believe that both the debt capital market and the equity capital market will show positive growth in the next six months.”
Maybank Investment’s recent deals include shopping mall operator CapitaMalls Malaysia Trust’s US$266 million IPO and property developer Sunway REIT US$455 million listing exercise.
The investment banking arm of Maybank is also advising on the upcoming listing of shipping firm MISC’s heavy engineering arm which is expected to raise over US$300 million.
Maybank Investment handled US$713 million in equity deals in the year to July 26, making it No. 6 in terms of Southeast Asian bookrunners, behind top-ranked Malaysian bank CIMB Group and JP Morgan, according to Thomson Reuters data.
The bank said it arranged RM7.25 billion of debt deals and RM2.36 billion of equity transactions last year.
Zafrul said prospects for next year were less clear but the investment bank planned to enter the Indonesia and Singapore markets by mid-2011 and was open to taking an equity stake to expand its regional footprint there.
“We are looking at all possible options,” said Zafrul who used to head Citi’s Malaysian investment banking business. “There are three options — to find a partner, to start from scratch, or to do a joint venture.”
He said Maybank Investment had yet to identify potential partners in these markets.
He said the bank planned to boost its staff strength of 580 to keep pace with business growth but did not give projections.
“We are looking at other capabilities such as structured products, futures - these are areas which we have not gone into but plan to go into.”
Maybank is due to report its fourth quarter earnings in August. Twenty-two analysts tracked by Thomson Reuters I/B/E/S expect it to post a net profit of RM3.7 billion ($1.16 billion) for the full year, surpassing its best ever full-year net profit of RM3.18 billion reported in fiscal 2007.
In May, the bank posted a January-March net profit of RM1.03 billion, its best-ever quarterly performance.
Shares of Maybank, which has a market value of US$17 billion, are up 12.24 per cent so far this year, outperforming the 6.2 per cent gain in the broader market index but lagging top dealmaker CIMB’s 16.8 per cent increase. — Reuters
http://www.themalaysianinsider.com/business/article/maybank-sees-solid-deal-flow-eyes-new-market/
Wednesday, 19 May 2010
Laggards Maybank, RHBCap more attractive after rate hike
Laggards Maybank, RHBCap more attractive after rate hike
Written by Loong Tse Min & Daniel Khoo
Monday, 17 May 2010 10:54
KUALA LUMPUR: Banks have started to raise interest rates after Bank Negara Malaysia (BNM) raised the overnight policy rate (OPR) by 25 basis points (bps) and big capitalised laggards could be the unexpected beneficiaries, analysts said.
Banks which were considered fully valued and less exciting due to their smaller share of the investment banking market, will now look attractive with an expected growth in net interest margins (NIM) of 10bps.
HwangDBS Vickers Research said other banks, which were laggards, would also benefit include Malayan Banking Bhd and RHB Capital Bhd. It said these banks would also benefit as proxies to economic growth after the first-quarter gross domestic product (GDP) grew at a sizzling 10.1%.
Last Thursday, BNM raised the OPR by 25bps to 2.5%, the second rate increase since March 4 and this has prompted several banks to hike their rates, effective this week.
Last Friday, Malayan Banking Bhd said it would revise upwards its deposit and base lending rate (BLR) from tomorrow with 25bps each. Maybank Islamic Bhd’s base financing rate (BFR) will similarly be increased by 25bps to 6.05%.
Other banks which are raising their rates are CIMB Bank, CIMB Islamic Bank and Bank Islam Malaysia Bhd.
HwangDBS said the OPR hike was positive for most banks as BLR-based loans tend to be re-priced within a week of a rate hike, while deposit rates take longer to adjust due to the various time buckets.
“Our sensitivity analysis shows that every 25bps hike in OPR would raise lending yields by 17bps and increase cost of funds by 7bps, thus widening NIM by 10bps and boosting earnings by 6.5%, on average,” it said.
HwangDBS said Maybank was a good proxy to the higher GDP and OPR hike expectations. It expects Maybank’s loan portfolio to expand 12%-15% from 2010 to 2012 compared with the industry average of 8% to 9%.
“Maybank and RHBCap are high conviction picks and we have buy call and target prices of RM9.10 and RM7.30, respectively,” it said.
The research house said the Alliance Financial Group, with 84% variable rate loans in its portfolio, would be the biggest winner while AMMB Holdings Bhd would be least affected due to its high proportion of fixed rate loans (57%).
AmBank Group’s chief financial officer and deputy group managing director Ashok Ramamurthy said there may be potential for RM15 million to RM20 million of revenue in the next 12 months which would be lost through “margin compression” due to the rising interest rate environment — which would make borrowing costs more expensive.
“Most banks around the world try to borrow short and lend long. And when they do that in a rising interest rate environment, there will be margin compressions. Margin compressions will be capped at RM50 million, 1.5% of our current revenues; but our actual exposure is much smaller, about one third of that,” Ashok said.
“So when you talk about our earnings guidance with profit growth of 16%-20% next year, that is after taking into account any potential impact from rising interest rates — that’s the net growth,” he added.
Maybank’s president and CEO Datuk Seri Abdul Wahid Omar said with inflation expected to rise to 2.3%, and with OPR increasing to 2.5%, the country was now experiencing positive real interest rates (after deducting inflation from interest rate figures).
He said interest rates were currently “not too high nor too low” and that it was accommodative and conducive for business and growth in the economy.
On the possibility of more OPR hikes, HwangDBS expects the rate to rise by another 50bps to 3% by the fourth quarter.
However, CIMB head of economics research Lee Heng Guie said BNM was neutral on the next rate move.
“Based on BNM’s policy statement, it is quite neutral, given the continued uncertainty of external factrors such as Greece’s sovereign debt crisis. We do expect rate change to move at a measured pace,” said Lee.
AmResearch senior economist Manokaran Mottian said the 25bps hike was a preemptive move by BNM. The central bank’s 25bps hike in March had been vindicated by the strong first-quarter GDP data.
Meanwhile, RHB Banking Group will raise the BLR for RHB Bank Bhd and the BFR for RHB Islamic from 5.8% to 6.05% from Wednesday. The new fixed deposit rates will be
This article appeared in The Edge Financial Daily, May 17, 2010.
Written by Loong Tse Min & Daniel Khoo
Monday, 17 May 2010 10:54
KUALA LUMPUR: Banks have started to raise interest rates after Bank Negara Malaysia (BNM) raised the overnight policy rate (OPR) by 25 basis points (bps) and big capitalised laggards could be the unexpected beneficiaries, analysts said.
Banks which were considered fully valued and less exciting due to their smaller share of the investment banking market, will now look attractive with an expected growth in net interest margins (NIM) of 10bps.
HwangDBS Vickers Research said other banks, which were laggards, would also benefit include Malayan Banking Bhd and RHB Capital Bhd. It said these banks would also benefit as proxies to economic growth after the first-quarter gross domestic product (GDP) grew at a sizzling 10.1%.
Last Thursday, BNM raised the OPR by 25bps to 2.5%, the second rate increase since March 4 and this has prompted several banks to hike their rates, effective this week.
Last Friday, Malayan Banking Bhd said it would revise upwards its deposit and base lending rate (BLR) from tomorrow with 25bps each. Maybank Islamic Bhd’s base financing rate (BFR) will similarly be increased by 25bps to 6.05%.
Other banks which are raising their rates are CIMB Bank, CIMB Islamic Bank and Bank Islam Malaysia Bhd.
HwangDBS said the OPR hike was positive for most banks as BLR-based loans tend to be re-priced within a week of a rate hike, while deposit rates take longer to adjust due to the various time buckets.
“Our sensitivity analysis shows that every 25bps hike in OPR would raise lending yields by 17bps and increase cost of funds by 7bps, thus widening NIM by 10bps and boosting earnings by 6.5%, on average,” it said.
HwangDBS said Maybank was a good proxy to the higher GDP and OPR hike expectations. It expects Maybank’s loan portfolio to expand 12%-15% from 2010 to 2012 compared with the industry average of 8% to 9%.
“Maybank and RHBCap are high conviction picks and we have buy call and target prices of RM9.10 and RM7.30, respectively,” it said.
The research house said the Alliance Financial Group, with 84% variable rate loans in its portfolio, would be the biggest winner while AMMB Holdings Bhd would be least affected due to its high proportion of fixed rate loans (57%).
AmBank Group’s chief financial officer and deputy group managing director Ashok Ramamurthy said there may be potential for RM15 million to RM20 million of revenue in the next 12 months which would be lost through “margin compression” due to the rising interest rate environment — which would make borrowing costs more expensive.
“Most banks around the world try to borrow short and lend long. And when they do that in a rising interest rate environment, there will be margin compressions. Margin compressions will be capped at RM50 million, 1.5% of our current revenues; but our actual exposure is much smaller, about one third of that,” Ashok said.
“So when you talk about our earnings guidance with profit growth of 16%-20% next year, that is after taking into account any potential impact from rising interest rates — that’s the net growth,” he added.
Maybank’s president and CEO Datuk Seri Abdul Wahid Omar said with inflation expected to rise to 2.3%, and with OPR increasing to 2.5%, the country was now experiencing positive real interest rates (after deducting inflation from interest rate figures).
He said interest rates were currently “not too high nor too low” and that it was accommodative and conducive for business and growth in the economy.
On the possibility of more OPR hikes, HwangDBS expects the rate to rise by another 50bps to 3% by the fourth quarter.
However, CIMB head of economics research Lee Heng Guie said BNM was neutral on the next rate move.
“Based on BNM’s policy statement, it is quite neutral, given the continued uncertainty of external factrors such as Greece’s sovereign debt crisis. We do expect rate change to move at a measured pace,” said Lee.
AmResearch senior economist Manokaran Mottian said the 25bps hike was a preemptive move by BNM. The central bank’s 25bps hike in March had been vindicated by the strong first-quarter GDP data.
Meanwhile, RHB Banking Group will raise the BLR for RHB Bank Bhd and the BFR for RHB Islamic from 5.8% to 6.05% from Wednesday. The new fixed deposit rates will be
- 2.5% (for one to five months, previously 2.25% for one to 11 months),
- 2.7% (six to 11 months),
- 3% for 12 months (from 2.6%) and
- 3.1% (13 to 35 months).
This article appeared in The Edge Financial Daily, May 17, 2010.
Thursday, 13 May 2010
A quick look at Maybank (13.5.2010)
A quick look at Maybank (13.5.2010)
http://spreadsheets.google.com/pub?key=tfMoQtAgU30SEiVrx-hXdHw&output=html
Thursday, 25 March 2010
Maybank proposes shareholders reinvest dividends into shares
| Written by Joseph Chin |
| Thursday, 25 March 2010 20:24 |
KUALA LUMPUR: MALAYAN BANKING BHD [] has proposed a recurrent and optional dividend reinvestment plan that allows shareholders to reinvest their dividend into new ordinary shares of the bank.
It said on Thursday, March 25 the plan was part of its efforts to enhance and maximise shareholders’ value via the subscription of new Maybank shares.
Maybank said the issue price of a new Maybank share would at a discount of not more than 10% to the five-day volume weighted average market price of the shares immediately prior to the price fixing date.
"The reinvestment plan will provide the shareholders with greater flexibility in meeting their investment objectives, as they would have the choice of receiving cash or reinvesting in the company through subscription of additional Maybank shares without having to incur material transaction or other related costs," it said.
http://www.theedgemalaysia.com/business-news/162382-maybank-proposes-shareholders-reinvest-dividends-into-shares.html
Friday, 13 November 2009
Maybank Q1 net profit jumps 54pc to RM881.8m
Maybank Q1 net profit jumps 54pc to RM881.8m
Published: 2009/11/13
Malayan Banking Bhd's (Maybank) (1155) first quarter net profit jumped 54 per cent, on account of strong performances of its treasury operations, international business, investment banking and insurance and takaful.
Results for the quarter to September 2009 were also boosted by the absence of one-off items of impairment charge recorded in the same period in 2008.
Maybank yesterday reported a net profit of RM881.8 million for the latest quarter, compared with RM572 million in the previous comparable period.
Maybank said its core commercial banking operations are expected to perform better with positive but modest loan growth although recovery in the small- and medium-sized enterprise segment, which has been adversely impacted by the downturn in the external sector, will be uncertain.
"Whilst seeking to expand and regain market share in selected business segments, the group will continue to be vigilant in ensuring that asset quality is preserved. Prudent risk management practices and stringent asset quality management should contain the risk of deterioration in asset quality," Maybank said in an announcement to Bursa Malaysia yesterday.
The group's net interest income for the first financial quarter ended September 30 2009 increased by RM362.6 million or 28.7 per cent over that of the corresponding period in 2008 to RM1,627.6 million.
The higher net interest income is mainly attributed by the income contribution from PT Bank Internasional Indonesia Tbk (BII), a 97.5 per cent subsidiary, which was only taken into account this year.
Non interest income was higher by RM647 million or 130.7 per cent compared to that of the previous corresponding period.
The higher non interest income was contributed by foreign exchange profit, fee income and other income, which were higher by RM232.9 million, RM79.4 million and RM137.9 million respectively.
Allowance for losses on loans, advances and financing was higher by RM232.3 million or 125.3 per cent due mainly to the specific allowance made at BII, whilst there was no consolidation of BII's specific allowance made in the corresponding period.
"We are confident of sustaining the current momentum for growth and we look to sustained business growth in our key markets across the region," Maybank president and chief executive officer Datuk Seri Abdul Wahid Omar said in a statement released to the press.
http://www.btimes.com.my/Current_News/BTIMES/articles/mayb12/Article/index_html
Date Dividends
10/7/2008 0.2
3/24/2008 0.15
12/31/2007 0.175
10/30/2007 0.4
4/10/2007 0.4
10/30/2006 0.35
12/23/2005 0.5
10/12/2004 0.25
3/11/2004 0.25
10/15/2003 0.17
4/14/2003 0.1
Published: 2009/11/13
Malayan Banking Bhd's (Maybank) (1155) first quarter net profit jumped 54 per cent, on account of strong performances of its treasury operations, international business, investment banking and insurance and takaful.
Results for the quarter to September 2009 were also boosted by the absence of one-off items of impairment charge recorded in the same period in 2008.
Maybank yesterday reported a net profit of RM881.8 million for the latest quarter, compared with RM572 million in the previous comparable period.
Maybank said its core commercial banking operations are expected to perform better with positive but modest loan growth although recovery in the small- and medium-sized enterprise segment, which has been adversely impacted by the downturn in the external sector, will be uncertain.
"Whilst seeking to expand and regain market share in selected business segments, the group will continue to be vigilant in ensuring that asset quality is preserved. Prudent risk management practices and stringent asset quality management should contain the risk of deterioration in asset quality," Maybank said in an announcement to Bursa Malaysia yesterday.
The group's net interest income for the first financial quarter ended September 30 2009 increased by RM362.6 million or 28.7 per cent over that of the corresponding period in 2008 to RM1,627.6 million.
The higher net interest income is mainly attributed by the income contribution from PT Bank Internasional Indonesia Tbk (BII), a 97.5 per cent subsidiary, which was only taken into account this year.
Non interest income was higher by RM647 million or 130.7 per cent compared to that of the previous corresponding period.
The higher non interest income was contributed by foreign exchange profit, fee income and other income, which were higher by RM232.9 million, RM79.4 million and RM137.9 million respectively.
Allowance for losses on loans, advances and financing was higher by RM232.3 million or 125.3 per cent due mainly to the specific allowance made at BII, whilst there was no consolidation of BII's specific allowance made in the corresponding period.
"We are confident of sustaining the current momentum for growth and we look to sustained business growth in our key markets across the region," Maybank president and chief executive officer Datuk Seri Abdul Wahid Omar said in a statement released to the press.
http://www.btimes.com.my/Current_News/BTIMES/articles/mayb12/Article/index_html
Date Dividends
10/7/2008 0.2
3/24/2008 0.15
12/31/2007 0.175
10/30/2007 0.4
4/10/2007 0.4
10/30/2006 0.35
12/23/2005 0.5
10/12/2004 0.25
3/11/2004 0.25
10/15/2003 0.17
4/14/2003 0.1
Sunday, 11 October 2009
Money flowing intotop three banks
Money flowing intotop three banks
Tags: CIMB Group Holdings Bhd | Malayan Banking Bhd | Public Bank Bhd | Top three banks
Written by Joyce Goh
Tuesday, 06 October 2009 10:32
PETALING JAYA: Investors have been seizing opportunities to pick up banking stocks on the back of their weaker share prices last week. For the week ended Oct 2, investors purchased some RM38.96 million worth of stock in Bloomberg’s top 20 buying-on-weakness, a list of which the top three banks in the country emerged on the top three spots.
The second largest bank in terms of assets — CIMB Group Holdings Bhd — saw the highest inflow of funds in terms of value, following a 0.2% decline in its share price week-on-week. The decline caused a two sen drop in share price to RM11.14 but investors acquired RM6.66 million worth of the banking group’s stock.
Meanwhile, PUBLIC BANK BHD []’s share price fell eight sen in a week closing at RM10.18 last Friday. This change of 0.8% did not deter investors who acquired RM6.65 million worth of the stock in the country’s third largest bank.
The largest bank in the country — MALAYAN BANKING BHD [] (Maybank) — saw an inflow of RM5.71 million into the stock following its share price falling 0.6% week-on-week. The stock ended at RM6.64 last Friday, down four sen from a week before.
When asked on this, banking analysts believe this trend could be driven by two factors — investors’ rising confidence in the sector as well as the fact that the top three banks make up quite a bit of the FBM KUALA LUMPUR COMPOSITE INDEX [] weightage.
“The top three banks in Bursa make up 30% in terms of the weightage in FBMKLCI 30. Therefore, when there is share price weakness, there’ll be funds that will come in and support it. So it (money flowing into the stocks due to share price weakness) could be because of that,” Maybank Investment Bank Research’s senior analyst Wong Chew Hann told The Edge Financial Daily.
“It could also be because investors are expecting improved earnings to flow into banks as the economy slowly mends itself. On top of that, their asset quality is intact. Overall, our banks are on steady ground,” she said.
Wong said banks are expected to see loans growth this year, albeit a slower growth compared to last year. “We are looking at 6% loans growth for the sector. Last year was 12.9%. We also think that 2010 will not be as good as 2008... looking at single digits growth. Our house view is that the economy will rebound next year but we will not be seeing that 5% to 7% GDP growth,” she noted.
CIMB ended yesterday at its 52-week high of RM11.50, up 36 sen from its close last Friday while Maybank added one sen for the same period to RM6.65.
Public Bank ended Monday unchanged from its close last Friday of RM10.18.
This article appeared in The Edge Financial Daily, October 6, 2009.
Tags: CIMB Group Holdings Bhd | Malayan Banking Bhd | Public Bank Bhd | Top three banks
Written by Joyce Goh
Tuesday, 06 October 2009 10:32
PETALING JAYA: Investors have been seizing opportunities to pick up banking stocks on the back of their weaker share prices last week. For the week ended Oct 2, investors purchased some RM38.96 million worth of stock in Bloomberg’s top 20 buying-on-weakness, a list of which the top three banks in the country emerged on the top three spots.
The second largest bank in terms of assets — CIMB Group Holdings Bhd — saw the highest inflow of funds in terms of value, following a 0.2% decline in its share price week-on-week. The decline caused a two sen drop in share price to RM11.14 but investors acquired RM6.66 million worth of the banking group’s stock.
Meanwhile, PUBLIC BANK BHD []’s share price fell eight sen in a week closing at RM10.18 last Friday. This change of 0.8% did not deter investors who acquired RM6.65 million worth of the stock in the country’s third largest bank.
The largest bank in the country — MALAYAN BANKING BHD [] (Maybank) — saw an inflow of RM5.71 million into the stock following its share price falling 0.6% week-on-week. The stock ended at RM6.64 last Friday, down four sen from a week before.
When asked on this, banking analysts believe this trend could be driven by two factors — investors’ rising confidence in the sector as well as the fact that the top three banks make up quite a bit of the FBM KUALA LUMPUR COMPOSITE INDEX [] weightage.
“The top three banks in Bursa make up 30% in terms of the weightage in FBMKLCI 30. Therefore, when there is share price weakness, there’ll be funds that will come in and support it. So it (money flowing into the stocks due to share price weakness) could be because of that,” Maybank Investment Bank Research’s senior analyst Wong Chew Hann told The Edge Financial Daily.
“It could also be because investors are expecting improved earnings to flow into banks as the economy slowly mends itself. On top of that, their asset quality is intact. Overall, our banks are on steady ground,” she said.
Wong said banks are expected to see loans growth this year, albeit a slower growth compared to last year. “We are looking at 6% loans growth for the sector. Last year was 12.9%. We also think that 2010 will not be as good as 2008... looking at single digits growth. Our house view is that the economy will rebound next year but we will not be seeing that 5% to 7% GDP growth,” she noted.
CIMB ended yesterday at its 52-week high of RM11.50, up 36 sen from its close last Friday while Maybank added one sen for the same period to RM6.65.
Public Bank ended Monday unchanged from its close last Friday of RM10.18.
This article appeared in The Edge Financial Daily, October 6, 2009.
Thursday, 1 October 2009
Maybank poised to expand in Indonesia
Maybank poised to expand in Indonesia
Written by Ellina Badri
Thursday, 01 October 2009 11:14
KUALA LUMPUR: MALAYAN BANKING BHD [] (Maybank) is poised to expand its Indonesian operations after its bottom line took a hit in an impairment charge in its last financial year ended June 30, 2009 pursuant to its acquisition of Bank Internasional Indonesia (BII).
Maybank president and chief executive officer Datuk Seri Abdul Wahid Omar said the banking group would expand its Indonesian operations as part of its aspiration to become the leading financial services group by 2015.
He said BII would be developed aggressively over the next three years, with its branch network to be expanded to 450 from 250 branches currently, and by doubling the presence of its automated teller machines (ATMs) to 1,500.
“We are targeting to have a sizeable presence in all areas in Indonesia,” Wahid told reporters after Maybank’s AGM yesterday. He said capital expenditure for its expansion was, however, still being finalised, with the amount of money spent to depend on the size of each branch.
Wahid said the bank would focus on improving BII’s fundamentals via loans and revenue growth, rather than achieving growth through mergers and acquisitions.
Maybank took a RM1.62 billion impairment charge on its 97.5%-owned BII in FY09 and an impairment loss of RM353 million in its 20%-owned MCB Bank in Pakistan that resulted in its net profit falling 76% year-on-year to RM691.88 million.
Wahid (left) and chief financial officer Khairusalleh Ramli at the AGM yesterday. Photo by Chu Juck Seng
Wahid added Maybank did not expect further impairment charges in FY10, with BII set to record profitable results in the current fiscal year.
He also said loan-loss provisions at its Indonesian unit would be “normal” moving forward, with nothing “out of the ordinary” expected.
Maybank’s total loan-loss provisions had risen 109.7% to RM1.7 billion in FY09, with the consolidation of BII’s loan-loss provisions for the first time by RM366.2 million.
Wahid is confident of an improved performance in FY10, though the current financial year would still be challenging, with the bank seeing a gradual recovery in tandem with the residual recession.
“Our improved performance will stem from the lack of impairment charges on our overseas acquisitions, the economic recovery which is expected to bring broad-based growth, results delivered from our overseas operations, and higher revenue and cost optimisation from our Leap30 transformation programme,” Wahid said.
He also said the bank was maintaining its FY10 headline key performance indicator of achieving 8% revenue growth and an 11% return on equity. On its Singapore operations, which contributed to S$248 million (RM613 million) in profit in FY09, he said Maybank’s presence there was far ahead of other Malaysian banks located there.
He said while Malaysian banks provided additional competition in the Singapore market, Maybank was viewed as a local player there and possessed a significant brand presence.
SMOOTH TRANSITION... Maybank’s outgoing chairman Tan Sri Mohamed Basir Ahmad (left) with his successor Tan Sri Megat Zaharuddin Megat Mohd Nor at a ceremony marking the handover of the chairmanship during the bank’s AGM in Kuala Lumpur yesterday. Photo by Chu Juck Seng
Elaborating on the bank’s Middle Eastern presence, with one branch located in Bahrain and a small stake in an investment company in Riyadh, Wahid said these were used as “listening posts” to help the bank capture greater capital flows between the Middle East and Malaysia.
On the bank’s dividend policy, he said it would maintain its payout at between 40% and 60% of net profit.
Asked on the impact of the flooding in the Philippines on its 45 branches there, he said of its branches, five were located in Manila, but they had not seen any major impact from the catastrophe. He added the bank had put in place contingency measures, and that it was “all under control”.
On Maybank’s outlook for the Malaysian economy, Wahid said the worst was over, with Maybank having revised its gross domestic product (GDP) forecast to a contraction of 2.9% from a previous projection of a 3.8% decline, while its 2010 GDP forecast had been revised upwards to 4.5% from 4.2%.
He also said inflation was expected to come in at 1% this year, and 1.5% in 2010, with upside risks, while the overnight policy rate was expected to be maintained at 2% in 2010.
Maybank also projected the ringgit to strengthen against the US dollar going forward, at RM3.50 to the greenback in end-2009 and RM3.40 to the dollar in end-2010.
During the AGM, Tan Sri Mohamed Basir Ahmad handed over the chairmanship of Maybank’s board to Tan Sri Megat Zaharuddin Megat Mohd Nor, who takes over today.
Mohamed Basir retired as chairman after 16 years of service, the longest-serving chairman on the bank’s board.
Megat Zaharuddin had served as an independent, non-executive director on Maybank’s board from July 2004 before resigning in February 2009.
He has returned as chairman upon being appointed by the bank’s largest shareholders. He also served as chairman of its remuneration and establishment committee, and was a member of its nomination committee.
He possesses over 30 years of experience in the oil and gas industry, and had been regional business CEO/MD of Shell Exploration and Production International BV (Netherlands), before retiring in January 2004.
Megat Zaharuddin is also currently chairman of the Malaysian Rubber Board, director of the Capital Market Development Fund, the International Centre for Leadership in Finance, and Australia’s Woodside Petroleum. He was also chairman of Maxis Communications Bhd from January 2004 until November 2007.
This article appeared in The Edge Financial Daily, October 1, 2009.
Written by Ellina Badri
Thursday, 01 October 2009 11:14
KUALA LUMPUR: MALAYAN BANKING BHD [] (Maybank) is poised to expand its Indonesian operations after its bottom line took a hit in an impairment charge in its last financial year ended June 30, 2009 pursuant to its acquisition of Bank Internasional Indonesia (BII).
Maybank president and chief executive officer Datuk Seri Abdul Wahid Omar said the banking group would expand its Indonesian operations as part of its aspiration to become the leading financial services group by 2015.
He said BII would be developed aggressively over the next three years, with its branch network to be expanded to 450 from 250 branches currently, and by doubling the presence of its automated teller machines (ATMs) to 1,500.
“We are targeting to have a sizeable presence in all areas in Indonesia,” Wahid told reporters after Maybank’s AGM yesterday. He said capital expenditure for its expansion was, however, still being finalised, with the amount of money spent to depend on the size of each branch.
Wahid said the bank would focus on improving BII’s fundamentals via loans and revenue growth, rather than achieving growth through mergers and acquisitions.
Maybank took a RM1.62 billion impairment charge on its 97.5%-owned BII in FY09 and an impairment loss of RM353 million in its 20%-owned MCB Bank in Pakistan that resulted in its net profit falling 76% year-on-year to RM691.88 million.
Wahid (left) and chief financial officer Khairusalleh Ramli at the AGM yesterday. Photo by Chu Juck Seng
Wahid added Maybank did not expect further impairment charges in FY10, with BII set to record profitable results in the current fiscal year.
He also said loan-loss provisions at its Indonesian unit would be “normal” moving forward, with nothing “out of the ordinary” expected.
Maybank’s total loan-loss provisions had risen 109.7% to RM1.7 billion in FY09, with the consolidation of BII’s loan-loss provisions for the first time by RM366.2 million.
Wahid is confident of an improved performance in FY10, though the current financial year would still be challenging, with the bank seeing a gradual recovery in tandem with the residual recession.
“Our improved performance will stem from the lack of impairment charges on our overseas acquisitions, the economic recovery which is expected to bring broad-based growth, results delivered from our overseas operations, and higher revenue and cost optimisation from our Leap30 transformation programme,” Wahid said.
He also said the bank was maintaining its FY10 headline key performance indicator of achieving 8% revenue growth and an 11% return on equity. On its Singapore operations, which contributed to S$248 million (RM613 million) in profit in FY09, he said Maybank’s presence there was far ahead of other Malaysian banks located there.
He said while Malaysian banks provided additional competition in the Singapore market, Maybank was viewed as a local player there and possessed a significant brand presence.
SMOOTH TRANSITION... Maybank’s outgoing chairman Tan Sri Mohamed Basir Ahmad (left) with his successor Tan Sri Megat Zaharuddin Megat Mohd Nor at a ceremony marking the handover of the chairmanship during the bank’s AGM in Kuala Lumpur yesterday. Photo by Chu Juck Seng
Elaborating on the bank’s Middle Eastern presence, with one branch located in Bahrain and a small stake in an investment company in Riyadh, Wahid said these were used as “listening posts” to help the bank capture greater capital flows between the Middle East and Malaysia.
On the bank’s dividend policy, he said it would maintain its payout at between 40% and 60% of net profit.
Asked on the impact of the flooding in the Philippines on its 45 branches there, he said of its branches, five were located in Manila, but they had not seen any major impact from the catastrophe. He added the bank had put in place contingency measures, and that it was “all under control”.
On Maybank’s outlook for the Malaysian economy, Wahid said the worst was over, with Maybank having revised its gross domestic product (GDP) forecast to a contraction of 2.9% from a previous projection of a 3.8% decline, while its 2010 GDP forecast had been revised upwards to 4.5% from 4.2%.
He also said inflation was expected to come in at 1% this year, and 1.5% in 2010, with upside risks, while the overnight policy rate was expected to be maintained at 2% in 2010.
Maybank also projected the ringgit to strengthen against the US dollar going forward, at RM3.50 to the greenback in end-2009 and RM3.40 to the dollar in end-2010.
During the AGM, Tan Sri Mohamed Basir Ahmad handed over the chairmanship of Maybank’s board to Tan Sri Megat Zaharuddin Megat Mohd Nor, who takes over today.
Mohamed Basir retired as chairman after 16 years of service, the longest-serving chairman on the bank’s board.
Megat Zaharuddin had served as an independent, non-executive director on Maybank’s board from July 2004 before resigning in February 2009.
He has returned as chairman upon being appointed by the bank’s largest shareholders. He also served as chairman of its remuneration and establishment committee, and was a member of its nomination committee.
He possesses over 30 years of experience in the oil and gas industry, and had been regional business CEO/MD of Shell Exploration and Production International BV (Netherlands), before retiring in January 2004.
Megat Zaharuddin is also currently chairman of the Malaysian Rubber Board, director of the Capital Market Development Fund, the International Centre for Leadership in Finance, and Australia’s Woodside Petroleum. He was also chairman of Maxis Communications Bhd from January 2004 until November 2007.
This article appeared in The Edge Financial Daily, October 1, 2009.
Tuesday, 8 September 2009
Maybank climbs on earnings upgrades
Maybank climbs on earnings upgrades
Published: 2009/09/08
Malayan Banking Bhd rose the most in a month in Kuala Lumpur trading, leading gains among lenders, after Credit Suisse Group AG said analysts had increased their profit estimates.
Malayan Banking, the country’s biggest bank and known as Maybank, climbed 1.5 per cent to RM6.60 at 10:22 am local time, set for its biggest advance since August 3. Analysts have raised their estimates for Malaysian bank earnings by 11 per cent for 2009 and 16 per cent for 2010 over the past six months, Danny Goh, an analyst at Credit Suisse, wrote in a report today.
“The earnings upgrades were to a large extent a reflection of increased optimism over the outlook for non-performing loans,” Goh said. “Improvement in non-interest income growth prospects could also be another key driver.”
Malaysian bank earnings may surge a “sterling” 34 per cent next year as the economy strengthens, CIMB Investment Bank Bhd said on September 3. Malaysia’s economy, the third-biggest in Southeast Asia, is forecast by the government to return to growth in the fourth quarter after slipping into its first recession in a decade last quarter.
Bumiputra-Commerce Holdings Bhd, the second-biggest, added 0.4 per cent to RM10.38, while RHB Capital Bhd added 0.8 per cent to RM5.04.
Loan applications in Malaysia in July rose 19 per cent, the largest monthly increase since August 2008, central bank data show. Since September, the banking industry’s gross non- performing loan ratio has fallen to its post-Asian financial crisis low of 3.9 per cent, Ng Wee Siang, a banking analyst at BNP Paribas, wrote in a report last month.
BNP Upgrade
BNP Paribas upgraded Malaysia’s banking industry to “buy” from “reduce” in August, saying positive government initiatives and an improving economy are helping to curb bad debts and revive lending growth.
Analysts’ estimates for Bumiputra-Commerce’s profit have been “materially upgraded but are still 3-4 per cent below Credit Suisse’s 2009 and 2010 estimates,” Credit Suisse’s Goh said in the report. Credit Suisse’s forecasts for Public Bank Bhd’s earnings are below analysts’ estimates, he said. -- Bloomberg
Published: 2009/09/08
Malayan Banking Bhd rose the most in a month in Kuala Lumpur trading, leading gains among lenders, after Credit Suisse Group AG said analysts had increased their profit estimates.
Malayan Banking, the country’s biggest bank and known as Maybank, climbed 1.5 per cent to RM6.60 at 10:22 am local time, set for its biggest advance since August 3. Analysts have raised their estimates for Malaysian bank earnings by 11 per cent for 2009 and 16 per cent for 2010 over the past six months, Danny Goh, an analyst at Credit Suisse, wrote in a report today.
“The earnings upgrades were to a large extent a reflection of increased optimism over the outlook for non-performing loans,” Goh said. “Improvement in non-interest income growth prospects could also be another key driver.”
Malaysian bank earnings may surge a “sterling” 34 per cent next year as the economy strengthens, CIMB Investment Bank Bhd said on September 3. Malaysia’s economy, the third-biggest in Southeast Asia, is forecast by the government to return to growth in the fourth quarter after slipping into its first recession in a decade last quarter.
Bumiputra-Commerce Holdings Bhd, the second-biggest, added 0.4 per cent to RM10.38, while RHB Capital Bhd added 0.8 per cent to RM5.04.
Loan applications in Malaysia in July rose 19 per cent, the largest monthly increase since August 2008, central bank data show. Since September, the banking industry’s gross non- performing loan ratio has fallen to its post-Asian financial crisis low of 3.9 per cent, Ng Wee Siang, a banking analyst at BNP Paribas, wrote in a report last month.
BNP Upgrade
BNP Paribas upgraded Malaysia’s banking industry to “buy” from “reduce” in August, saying positive government initiatives and an improving economy are helping to curb bad debts and revive lending growth.
Analysts’ estimates for Bumiputra-Commerce’s profit have been “materially upgraded but are still 3-4 per cent below Credit Suisse’s 2009 and 2010 estimates,” Credit Suisse’s Goh said in the report. Credit Suisse’s forecasts for Public Bank Bhd’s earnings are below analysts’ estimates, he said. -- Bloomberg
Friday, 28 August 2009
Maybank: After writedowns, time to log profits
After writedowns, time to log profits
By Adeline Paul Raj
Published: 2009/08/27
With the issue of impairment charges settled, Malayan Banking management's focus for the current fiscal year would be earnings deliverance, says an analyst with AmResearch
MALAYAN Banking Bhd (Maybank) (1155), the country's top lender, must focus on delivering earnings at its newly-acquired banks, particularly Bank Internasional Indonesia (BII), now that it has gotten the issue of impairment charges out of the way, analysts said.
The issue of how much impairment charges Maybank would have had to make, particularly for BII, had been one of the biggest things weighing the stock in recent months.
In the end, the charges - which is the difference between what it paid for the banks and their actual fair value - came in within, albeit at the higher end of, analysts' expectations.
Maybank had decided to "bite the bullet" by taking a huge RM1.97 billion impairment charge for its investments in BII and MCB Bank in Pakistan.
This pushed the group into the red in its final quarter, and re-duced earnings for the full year ended June 30 2009 to just RM692 million, its lowest annual profit in a decade.
With that issue out of the way, AmResearch upgraded its call on Maybank's stock to a "hold" from "sell" previously, and raised the target price to RM7.10 from RM4.60.
"With the issue of impairment charges settled, management's focus for (the current fiscal year) would be earnings deliverance," its banking analyst Fiona Leong said in a research note yesterday.
The stock's share price performance, however, is likely to track the FTSE Bursa Malaysia KLCI index until there is a firm uptrend in operating profits, she added.
She expects Maybank's net profit to rise 18 per cent to RM2.56 billion in the current year and RM2.83 billion in the next. This is after factoring in better-than-expected non-interest income from the treasury operations and capital market-related businesses.
Analysts, however, expect Maybank's return-on-equity (ROE), a measure of how well its re-invested earnings are used to generate additional earnings, to be "sub-par" over the next two to three years following its expen-sive acquisitions.
They said the management had indicated that it would take a few years before ROE, which stood at just 10 per cent last year, could go back up to pre-acquisition levels of about 14 per cent.
The bank is targeting an ROE of 11 per cent for the current year.
Analysts are also concerned that the group may have to do more cleaning up of its loan books, particularly for BII, in the current year. It already set aside large loan loss provisions of about RM1.7 billion last year compared with RM810 million previously.
"In view of its sub-par ROEs and relatively long gestation period for expensive overseas acquisitions to start contributing meaningfully, we prefer Public Bank and Bumiputra-Commerce for cheaper valuations and comparatively higher ROEs among the larger banks," OSK Research's analyst Keith Wee said.
OSK maintained its "neutral" call on the stock, but raised the target price to RM6.20 from RM5.15.
Maybank closed at RM6.47 yesterday, five sen lower than the previous day.
By Adeline Paul Raj
Published: 2009/08/27
With the issue of impairment charges settled, Malayan Banking management's focus for the current fiscal year would be earnings deliverance, says an analyst with AmResearch
MALAYAN Banking Bhd (Maybank) (1155), the country's top lender, must focus on delivering earnings at its newly-acquired banks, particularly Bank Internasional Indonesia (BII), now that it has gotten the issue of impairment charges out of the way, analysts said.
The issue of how much impairment charges Maybank would have had to make, particularly for BII, had been one of the biggest things weighing the stock in recent months.
In the end, the charges - which is the difference between what it paid for the banks and their actual fair value - came in within, albeit at the higher end of, analysts' expectations.
Maybank had decided to "bite the bullet" by taking a huge RM1.97 billion impairment charge for its investments in BII and MCB Bank in Pakistan.
This pushed the group into the red in its final quarter, and re-duced earnings for the full year ended June 30 2009 to just RM692 million, its lowest annual profit in a decade.
With that issue out of the way, AmResearch upgraded its call on Maybank's stock to a "hold" from "sell" previously, and raised the target price to RM7.10 from RM4.60.
"With the issue of impairment charges settled, management's focus for (the current fiscal year) would be earnings deliverance," its banking analyst Fiona Leong said in a research note yesterday.
The stock's share price performance, however, is likely to track the FTSE Bursa Malaysia KLCI index until there is a firm uptrend in operating profits, she added.
She expects Maybank's net profit to rise 18 per cent to RM2.56 billion in the current year and RM2.83 billion in the next. This is after factoring in better-than-expected non-interest income from the treasury operations and capital market-related businesses.
Analysts, however, expect Maybank's return-on-equity (ROE), a measure of how well its re-invested earnings are used to generate additional earnings, to be "sub-par" over the next two to three years following its expen-sive acquisitions.
They said the management had indicated that it would take a few years before ROE, which stood at just 10 per cent last year, could go back up to pre-acquisition levels of about 14 per cent.
The bank is targeting an ROE of 11 per cent for the current year.
Analysts are also concerned that the group may have to do more cleaning up of its loan books, particularly for BII, in the current year. It already set aside large loan loss provisions of about RM1.7 billion last year compared with RM810 million previously.
"In view of its sub-par ROEs and relatively long gestation period for expensive overseas acquisitions to start contributing meaningfully, we prefer Public Bank and Bumiputra-Commerce for cheaper valuations and comparatively higher ROEs among the larger banks," OSK Research's analyst Keith Wee said.
OSK maintained its "neutral" call on the stock, but raised the target price to RM6.20 from RM5.15.
Maybank closed at RM6.47 yesterday, five sen lower than the previous day.
Thursday, 27 August 2009
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
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
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