No cause for concern over bank's liquidity, says Maybank

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KUALA LUMPUR (Aug 13): Malayan Banking Bhd (Maybank) said its liquidity conditions remain comfortable, with a loan-to-deposit ratio (LDR) of 94.7% as at end-March 2017.

The country's largest lender by assets was responding to a Bloomberg report on Friday, which had stated that Maybank's LDR was approaching 101% when highlighting the lack of deposits at Malaysia's banks.

The report also quoted CIMB Group Holdings Bhd analyst Winson Ng as noting that the banking industry's LDR ratio had gone from 76% in February 2012 to 90% in June.

In a statement today, Maybank group chief financial officer Datuk Amirul Feisal Wan Zahir said the news article and the Malaysian banking research report it quoted, did not give a true picture of Maybank’s careful management of its assets and liabilities.

“Maybank runs its business at the highest level of prudence and transparency and we have clearly disclosed in our quarterly earnings presentations, the levels of both our LDR and liquidity coverage ratio (LCR),” he said.

Feisal said for Maybank’s Malaysian operations, its LDR was 90.6% as of March 2017, and this has remained fairly stable over the last year from 90.2% in March 2016 and 91.3% in December 2016. Deposits growth was also supported by low-cost current account and savings account (CASA) growth.

The group, he added, has been actively focusing its attention on increasing its CASA component, and where necessary, moving away from the higher funding cost segments, such as fixed deposits.

Maybank’s Singapore operations, meanwhile, had an LDR of 89.5% as of March 2017, while Maybank Indonesia’s LDR at the bank level stood at 88.4%.

“To state that our LDR ratio is approaching 101% is wrong and can lead to misunderstanding among our stakeholders, including our customers, shareholders and regulators,” said Feisal.

He also noted that the research report which stated Maybank’s LDR as being 99.2%, had excluded the Islamic investment accounts (IAs) from its computation of Maybank Group’s LDR, hence resulting in it reporting a higher LDR for Maybank.

“This is a misrepresentation of LDR computations as IA should be included in the LDR computation for Maybank Group and Maybank Malaysia as provided for under Malaysian banking guidelines.

"If IA is excluded from the LDR computation, then the associated loan amount should also be excluded in the computation as investment accounts are meant to fund loans,” he said.

IA is a banking product offered by Maybank Islamic Bhd, which in essence, is similar to traditional deposits with CASA and time deposit features, and used to fund Islamic assets. The IAs were reclassified from Mudarabah deposits under the old guidelines on Islamic banking to Mudarabah Investment Accounts (IAs) starting from July 2015.

Feisal also clarified that the group’s liquidity coverage ratio, which measures how sufficiently banking institutions hold high-quality liquid assets to withstand an acute liquidity stress scenario over a 30-day horizon, stood at 134% as of end-March 2017. This was well above the Bank Negara Malaysia requirement of 80% for 2017.

On the issue of some Malaysian banks’ (including Maybank’s) net interest spread being less than 2% as also stated in the Bloomberg report, Feisal said Maybank’s net interest margin (NIM) stood at a healthy level at 2.43% as of 1QFY17.

“We have actually seen our NIM expand 9 bps from 2.34% a year ago arising from our disciplined loan pricing and ability to reduce our cost of funding by focusing on CASA growth."

On Malaysian banks’ growing reliance on foreign currency debt issuances, Feisal pointed out that Maybank Group’s total borrowings, including subordinated debt and capital instruments was 7.6% of total assets.

Feisal also dismissed concern over lending to riskier clients, saying Maybank has always applied a disciplined and prudent credit management framework in accordance with its risk appetite.

"Regular oversight via committees that encompasses senior executives and board members is applied at all times to ensure that asset quality is managed appropriately," he added.