This article first appeared in The Edge Malaysia Weekly on April 29, 2019 - May 5, 2019

THIS year will be tough … I’m not going to kid anyone,” admits Ami Moris frankly.

The CEO of Maybank Kim Eng group of companies, the investment banking arm of Malayan Banking Bhd (Maybank), adds: “Capital markets have always been very challenging … but they are even more so today. While everyone has been talking about the disruption caused by technology over the last five years, I think in the last three years, the rate and intensity of change driven by tech has made capital markets a lot more competitive.”

Ami is leading Maybank Kim Eng at a challenging time indeed. The global investment banking landscape is at its toughest yet with banks scrambling to reinvent their business models as uncertainty continues to cloud the operating environment.

Nevertheless, Ami believes now is the time for Maybank Kim Eng to claim its “right to win Asean”.

“The investment banking group has seen fairly steady growth. The footprint that we acquired in 2011 through the acquisition of Kim Eng was one that we needed to be able to expand our investment banking capabilities from Malaysia into the rest of the region. Maybank Kim Eng is eight years old today and in this period, we’ve had a lot of breakthroughs, especially under my predecessor Datuk John Chong. The key thing that we needed to do and focus on after the acquisition was to build confidence in doing cross-border transactions,” she says in her first media interview since being appointed CEO in October last year.

“We are now beginning to monetise the (Kim Eng) investment. I think Asean-6 is massive. Together with our licence in Hong Kong and India, we already cover a large part of the globe. So, I think the focus is really to deepen our presence in each market, to be a lot more targeted in segments that we want to really serve.”

Ami believes it is time to concentrate on the investment broking and securities group’s strengths and differentiating capabilities. “In terms of differentiating capabilities, we have been investing in our IP (intellectual property) and thought leadership. So, we have the three I’s in terms of what we want to distinguish ourselves in — intelligence, ideation and innovation,” she says, adding that these ideals were inherited from Maybank Group with its strong balance sheet.

Maybank Kim Eng still has one of the largest teams of analysts on the ground, Ami points out. “When we have boots on the ground, we are able to collect market intelligence. Markets are all about intelligence — who is doing what, talking to who and for what reason. Such intelligence is something we gather conscientiously to make sure that we have the insights … so when we want to develop ideas, they are very grounded in the local context. Our in-country specialists are there to always make sure that we understand the local context. Together with our in-country teams supported by our regional sector bankers — that is the cohesive way in which we try to approach clients who look to us for solutions and advice,” she says.

“Once we have the intelligence, we turn them into insights and form our ideas, which is our IP. Increasingly, with tech, there is more ability to also be innovative to develop a lot more depth and analysis and even to move towards predictive trends based on our proprietary data.”

Indeed, Ami and her team have a lot to do, given the harsh operating environment, and the numbers speak for themselves.

The investment banking arm’s contribution to Maybank Group as a whole has been on a downward trend over the years. It accounted for 8% of the group’s net operating income in FY2014 but this decreased to 7% in 2015, 6.7% in 2016, 5.7% in 2017 and 5.2% last year. Contribution to total net operating income fell 8.5% year on year to RM1.2 billion in FY2018.

Scaling up

According to Ami, the investment bank’s mandate today is to ensure it scales up its capabilities across Asean. “Investment bankers always talk about operating leverage — for every dollar of fixed cost we invest in, we want to make sure that the multiplier revenue is there across the region. So, where do we see ourselves in five years? Being a very successful Asean investment bank,” she says.

“Right now, our tag line is ‘Asean Investment Bank’. Hopefully, in five years, it will be ‘The Asean Investment Bank’!”

Currently, Maybank Kim Eng’s business is spilt between Malaysia and ex-Malaysia in terms of top line. “Naturally, we want ex-Malaysia to be a far larger contributor to our earnings because of the growth potential of the region. It would be great if we could have 60% to 70% from outside Malaysia,” remarks Ami.

After Malaysia, Thailand is the next largest market for the investment bank. “We have been the No 1 broker in Thailand for 16 years as at last year. Its potential is significant. Just as we position Malaysia as the gateway to Asean, Thailand for us is the gateway to the greater Mekong sub-region of Cambodia, Laos, Myanmar and Vietnam. So, it’s a very important market for us,” Ami points out.

The acquisition of Kim Eng in 2011 was a coup for Maybank as it expanded the latter’s footprint and clientele into regional markets. It also boosted the banking group’s stockbroking and investment banking operations regionally.

At the time, Kim Eng was the top stockbroker in Thailand, second in the Philippines, third in Indonesia and fourth in Singapore.

Following the purchase, Maybank Kim Eng became the largest brokerage firm by trade value in Asean and continues to be at the top today.

As at March this year, it was ranked the top investment bank in Asean for debt capital markets and local currency bonds, and fifth in investment banking and advisory.

At 1.91 times book value, the price paid for Kim Eng was at the high end of valuations for stockbrokers but analysts noted at the time that it would give Maybank an important platform to extend its reach and become a major regional player.

However, some analysts had pointed out that it was imperative for the enlarged group to quickly adapt to the changing business landscape and carve its own competitive advantage, given that stockbroking was fast becoming a sunset industry.

“Maybank Group’s stockbroking arm has to figure out how to extract more value from the acquisition. One thing to note though is that over the years, Maybank Kim Eng has emerged as a dominant local player when it comes to investment banking,” says a head of research at a foreign research house.

Eight years on, the stockbroking industry continues to face margin compression — which is a “nightmare”, according to Ami.

“It’s very tough for our institutional business, the main challenge for which is electronification. All the markets are facing that. So, you have to give clients good reasons to pay for what you know on the ground, what you see and what predictive trends you are able to provide,” she says.

Maybank Kim Eng’s cost income ratio (CIR) has also been trending downwards. “The investment banking industry is very particular. The bulk of our cost is for talent because we pay people to do a lot of thinking. Managing costs will continue to be an imperative and we have been successful in trimming it year on year,” Ami says.

“For us, the external view is key. We don’t just analyse our data but we also analyse externally and we know we have been outperforming our competitors (in terms of CIR and return on equity) (see chart). Maybank is very disciplined … but I’m not saying everything is hunky-dory. Investment banking is a tough business.”

She points out that the team has been working very hard in the past eight years to build on the expanded footprint it has today. “We were part of the IPO (initial public offering) for Vinhomes — the largest to date in Vietnam at about US$1.3 billion. We were also part of the issuance of the Republic of Indonesia’s US$2 billion sovereign sukuk, which has a green tranche.

“And we had a fairly significant US$155 million IPO of D.M. Wenceslao and Associates, Inc — a commercial and residential property developer in the Philippines. We are also the principal adviser for Leong Hup’s IPO — one of the biggest here in close to two years. In Thailand, we won an award for the US$500 million IPO of TPI Polene that was listed in 2017.”

Ami is quick to say that while awards are not everything, recognition outside Malaysia is important for the investment bank. “We are only eight years old and we are trying to make sure that when we look at the region, we are able to encompass it holistically, understand the needs of our clients, communities, and to make sure we are able to deliver solutions that are appropriate,” she adds.

Eyeing more strategic partnerships

Ami believes that for any investment bank, being responsive to market conditions is crucial. “Over the last two to three months, there has been a lot of rebalancing by regional and global banks. What we want to focus on is strategic partnerships with regional players who are able to leverage our distribution, in which we have invested significantly in Asean as well as the UK and the US. What we also want to tap into are offerings and placements out of other parts of the region,” she says.

“We have three strategic partnerships at the moment — with Mizuho Securities Co in Japan, Daishin Securities in South Korea, and Cathay Securities in Taiwan. There are always new ones we are looking at.”

Earlier this year, Maybank closed its Hong Kong and China institutional equity research business to focus on Southeast Asian operations.

“If you read between the lines for our Hong Kong office’s (closure), we will naturally be working on solutions to ensure that our clients will still always have access and reach to those markets. So obviously, we will always need to ensure that,” hints Ami.

The way forward

To take the team forward amid a challenging global operating landscape, Ami charts the strategy and direction for Maybank Kim Eng into three focal points.

“First, we want to naturally leverage our footprint across the region. The imperative is to do it responsibly. I know a lot of hype surrounds the whole sustainability agenda. But for us, it’s very real. The mission statement of the bank is humanising financial services. While we want to help accelerate growth in Asean, we want to make sure that it’s done responsibly so that Asean can grow into a sustainable and competitive economic region. It’s all about making sure we are successful in the union of profit and purpose,” she says.

“Secondly, the intensity and pace of change means we need to lean hard on technology and be able to really leverage and deploy it. Technology in investment banking and advisory is something that can play a significant role because it is about getting a deep understanding of the landscape.

“The third focal point is to be customer-centric, where the group serves clients in a holistic and individualised manner.”

It is noteworthy that the investment bank does not just focus on its clients. It also ensures there is mutual respect among the team, which Ami describes as very “eclectic”.

“We are really an Asean team. It is like how Asean is this very vibrant collection of people and cultures with a common history. Everyone in our team has respect and regard for each other. That is very important,” she stresses.

On the substantive shift in the industry in terms of what value is, the veteran stockbroker says, “What value can you deliver? What value are clients willing to pay for? That is the substantive shift.

“I’m not saying we are not impacted by change. But then again, it is about ensuring that we have a competitive advantage. Our competitive advantage is that we are in Asean, we have a lot of proprietary data of Asean, on Asean. We understand the region and, hopefully, that should convert to better understanding, better reach, better products and services, to serve our communities.”

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