Thursday 28 Mar 2024
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This article first appeared in The Edge Financial Daily, on April 8, 2016.

 

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KUALA LUMPUR: Despite the economic uncertainties, Malayan Banking Bhd (Maybank) is still looking for merger and acquisition (M&A) targets to achieve its regional organisation status with 40% of pre-tax profit derived from international operations.

Maybank president and chief executive officer Datuk Abdul Farid Alias, who revealed its next five-year transformation plan in strengthening its position in Asean yesterday, said the group did not achieve the 40% target last year as it did not acquire any asset.

According to Maybank’s annual report, the banking group’s international business contributed 27% of its pre-tax profit for the financial year ended Dec 31, 2015 (FY15).

“Many opportunities are available, but we have to be very disciplined in making the decision as we don’t need to acquire [assets] just to meet the objective, because for us, the right investment is paramount. We don’t put that objective as a pressure for us to make unwise decisions on acquisition,” he told reporters after the group’s annual general meeting yesterday.

Abdul Farid, who sees difficulty in executing M&A plans, opines that the right assets must be able to be integrated with Maybank’s operation and corporate culture.

“If there is an opportunity that makes [commercial] sense, we would go after it, provided that we can negotiate directly,” he said.

Abdul Farid acknowledges that the group has been approached by many parties, but none is right for the group to pursue so far.

When asked if he still pursues Thailand’s commercial banking business, Abdul Farid said that the management is not limiting itself to a particular market.

“We are looking at all markets in Southeast Asia and Asean,” he said, adding that the market has to address requirements for the region.

Maybank outlines its 2020 strategic objectives aimed at being Asean’s leading financial services provider.

Abdul Farid laid out five broad strategic objectives for the group, which are to be the top Asean community bank, the leading Asean wholesale bank linking Asia, the leading Asean insurer, the global leader in Islamic finance and the digital bank of choice.

“The outlook is how do we manage our portfolio; we want to make sure that we can diversify the risk very well. We don’t want certain markets to carry big risk to [the]organisation,” he emphasised.

Commenting on the group’s higher Indonesia’s loan target of 11% to 13% this year, Abdul Farid said once the division rebalances its corporate loan portfolio, loan growth will bounce back to the normal level there.

The group’s Indonesia-listed subsidiary PT Bank Maybank Indonesia Tbk only achieved a loan growth of 5.9% as of Dec 31, 2015 from a year earlier, which dragged the slowdown of corporates loans.

Meanwhile, Maybank, which saw its earnings being affected by high impairment losses, expects credit cost to remain elevated and may rise to 50 basis points (bps) in the worst-case scenario.

Abdul Farid said credit charges were widened to 41bps in 2015, a rate higher than the management’s expectation from 23bps in 2014. He anticipates it will hover around the same level of 40 to 50bps this year.

Due to high impairment losses, Maybank’s net profit rose merely 1.78% to RM6.84 billion in FY15, from RM6.72 billion in FY14, while revenue was 13.6% higher at RM40.56 billion, compared with RM35.71 billion a year ago.

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