FOR some time now — maybe about a year — a cloud of uncertainty has been hanging over Maybank Investment Bank Bhd (Maybank IB), brought about by the departure of its CEO Tengku Datuk Zafrul Aziz.
Zaf, as he is popularly known, was supposed to revitalise Maybank IB and was instrumental in the investment banking group winning such high-profile deals as the merger between SapuraCrest Petroleum and Kencana Petroleum, which created the RM20 billion behemoth SapuraKencana Petroleum Bhd, and the initial public offering of Westports Holdings Bhd — the largest flotation in the region last year — that raised RM2.2 billion.
While his departure was one thing, Zafrul joined rival CIMB Group Holdings Bhd, which is now in merger talks with RHB Capital Bhd and Malaysia Building Society Bhd. The merger, if successful, would make the already challenging operating environment for investment banks, including Maybank IB, even more difficult.
It is against this backdrop that new CEO John Chong Eng Chuan, a 21-year Maybank IB veteran, has taken the helm. However, he — like many others in the higher echelons of Maybank IB — is unperturbed.
“I believe it is the talent that we have that builds the brand, not the brand that builds the people,” Chong tells The Edge in an exclusive interview.
Maybank IB is in pole position in Malaysia and third in the region in terms of fixed income and is the leader here but third or fourth in the region in loan syndication, he adds. As for investment banking advisory, it is among the top three in the region.
“No one individual can claim credit for this … we have the benefit of a very, very strong team.
“We have many people within the organisation who have very strong relationships with different clientele, not just in Malaysia but also regionally. A lot of these clients have been with us for many years and I’m sure they will be with us in the future as well. The deal flows, as you can see, are ongoing,” Chong remarks.
In a nutshell, he seems confident of his and his team’s ability to steer Maybank IB through its current sticky patch. In fact, Chong’s confidence in his team and his sincerity stand out during the interview.
Nevertheless, Maybank IB has seen better days.
A challenging period
The company posted a pre-tax profit of RM114.6 million in its six months ended June 30, down 54% from a year ago.
However, its decline was not as drastic as that experienced by some of the other leading merchant banks — as much as 90% (see “A challenging year for investment banks” on Page 26).
According to Chong, Maybank IB was adversely affected by political issues in Thailand, which resulted in a weak market; the crash of penny stocks in Singapore, which led to a 30% fall in the market; and plans put on hold in Indonesia because of its elections.
“Things that are beyond our control — economic outlook, regional climate, geopolitical issues, global issues — we can mitigate, but it’s quite a challenge. Investment banking is market driven,” he explains.
In the performance review that accompanies its financials, Maybank IB’s parent Malayan Banking Bhd (Maybank) says, “The decrease was due to lower non-interest income of RM175.3 million primarily from lower brokerage and underwriting income.
“This decrease was, however, mitigated by lower overheads of RM47.7 million, lower impairment losses on financial investments of RM5.6 million and higher writeback of impairment losses on loans, advances and financing of RM5.2 million.”
Nevertheless, Chong sees things picking up in the second half of the year. “We are confident things will improve in this half of the year; the markets seem to be stabilising.”
In Thailand, political turmoil has left many companies, including Maybank IB, in the lurch, although the situation is improving. That aside, the conclusion of elections in Indonesia bodes well for the company. Its presence in these markets is the result of an acquisition done in 2011.
The merits of the Kim Eng acquisition
Much of Maybank IB’s success stems from its acquisition of Singapore-based Kim Eng Securities in mid-2011, which was concluded for close to RM4.3 billion.
Aseambankers, which later became Maybank IB, had a one-country business model, although it already had a regional presence. In contrast, after its merger with Kim Eng, Maybank IB (or Maybank Kim Eng outside Malaysia) is in 10 countries: Malaysia, Singapore, Thailand, the Philippines, Indonesia, Vietnam, Hong Kong, India (Mumbai), the UK (London) and the US (New York).
“So, we have the reach we need for international transactions. It has been fantastic and very exciting, and opened up a lot of opportunities for us. We have a very strong franchise in Thailand — Kim Eng has been the No 1 stockbroking company there for the past 13 years.
“If you look at Asean, we have the largest equity franchise now in terms of trade value … this is as at the end of last year,” Chong says.
Among the keys to Maybank IB’s success is its clients growing regionally across Asean and exploring new markets in the neighbouring countries, he adds. This has given Maybank IB a platform in many expanding regional businesses, where it is the intermediary between the investors and issuers of equity and debt.
“The thinking about investment banking is that it is very transactional, but what differentiates us from the other companies is that we are very relationship driven. We focus on relationships and seek long-term, sustainable relationships. A lot of our clients have actually grown with us — from within a country to the region,” Chong explains.
While he seems to have started out well, successfully tackling the many issues before him, rest assured that all eyes will be on this veteran’s moves and how Maybank IB fares.
|Chong: I believe it is the talent that we have that builds the brand, not the brand that builds the people - Photo by Mohd Izwan|
This article first appeared in The Edge Malaysia Weekly, on October 06 - 12, 2014.