This article first appeared in The Edge Financial Daily on April 13, 2018

KUALA LUMPUR: Malayan Banking Bhd (Maybank), the country's largest lender by assets, is targeting to maintain its strong financial performance for its financial year ending Dec 31, 2018 (FY18) and is likely to see another record year.

According to its group president and chief executive officer (CEO) Datuk Abdul Farid Alias, the aspiration target for the bank is to see another record year from an absolute number in FY18.

“From an absolute number, definitely. We hope, from an absolute number or nominal number, to see another record year and, therefore, it will be translated to distribution to all stakeholders,” Abdul Farid told reporters after its annual and extraordinary general meetings yesterday.

Bank chairman Datuk Mohaiyani Shamsudin concurred, noting that while FY17 had been a tough year, Maybank managed to record a strong growth and a record profit, and is hopeful to do “as well, if not better” in FY18.

Abdul Farid, however, shared that the growth will also depend on how the market performs for the year.

“We also don’t want our people to be too aggressively pursuing targets if the market is not growing as fast as we thought. The whole idea is we do not want to take unnecessary risk,” he added.

Maybank registered a record net profit of RM7.52 billion in FY17, rewarding its shareholders with a total dividend of 55 sen per share amounting to RM5.89 billion. It was the highest since the 57 sen per share, paid out in FY14, which translated into a dividend payout ratio of 78.5%.

Shareholders can anticipate another bumper dividend payout in FY18 if Maybank achieves its earnings target and the dividend payout ratio remains the same.

It is worth noting that Maybank’s strong financial performance last year was due to the bank’s disciplined pricing approach and improved cost of funding which led to an increase of nine basis points (bps) year-on-year (y-o-y) to 2.36% for its net interest margin. In fact, loan growth for FY17 was at 1.7%, or 4% if normalised for currency conversion effects, which falls short of its initial target of 6% to 7%, as well as the revised target of 3%.

For FY18, while Maybank expects its three home markets — Malaysia, Indonesia and Singapore — to see stable growth, Abdul Farid had announced in February that the loan growth target for the year is 4%, which is lower than the initial target set for FY17. The key performance indicator (KPI) for FY18 is to target return on equity (ROE) of about 11%.

Maybank is also set to intensify its digital growth by the acceleration of its migration to its digital platform, enhancing its distribution channels and improving its capabilities to offer consumers what they need. Among some of the innovative solutions that the bank has embarked on include the enhancement of Maybank2U app, as well as the first bank to launch the cashless mobile payment option using QR code.

On the capital expenditure that Maybank would set aside for digital enhancement, Abdul Farid pointed out that the uncertainties surrounding the technology and digital space make it difficult for an allocation to be made. But he emphasised that the bank is willing to invest in the digital space if the solutions enhance customers’ experience and add value to the bank.

“If there are any ideas that are good, we would have invested in it,” he added.

On the blockchain technology gaining traction with at least five banks tested with Ripple’s blockchain technology, Abdul Farid said it is an exciting opportunity but remains impractical at the moment.

“In fact, we have tested blockchain in Maybank and it works like [a] charm,” he added.

However, as the adoption is not being accepted by a lot of people and different adoption strategies are seen in different countries, it will be difficult to be implemented.

While Abdul Farid did not disclose which blockchain technology was tested, he explained that there are different blockchain technologies that are offering different capabilities but without a synchronised adoption in different parts of the world and acceptance by the public, the technology will remain as ideas.

Recall that the hype surrounding the blockchain technology had led to a strong rally in the cryptocurrencies market in 2017 before a sharp correction seen this year.

Maybank’s share price closed 0.57% or six sen lower at RM10.54 yesterday, bringing a market capitalisation of RM114.9 billion.