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How Maybank Is Cashing In On The Regional Growth
By: Brian Brinker
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By: Ong Qiuying
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The Malaysian government has identified the financial sector as an important area of potential growth. With the government prioritising high value added sectors, the financial services sector offers a chance for growth and prosperity. As such, the resources and energy dedicated to expanding the sector will be substantial.

In 2010, the financial services sector contributed 8.6 percent to Malaysia’s gross domestic product (GDP). The government projects that by 2020 it should contribute 12 percent.

Given the potential, the Malaysian government is looking to overhaul local regulations and to encourage savings and investment among its citizens. It is also looking to assist the financial sector in integrating into the global financial system.

The World Bank also notes that Malaysia’s economic development has benefited the bottom 40 percent of society and that extreme poverty has been nearly eradicated.

This results in more potential customers for Malayan Banking (Maybank) and other financial institutions as middle and upper class individuals tend to use banking services more frequently.

Maybank’s home markets are Malaysia, Singapore and Indonesia, which accounted for 91.2 percent of the total pre-tax profit in FY13. Singapore is the second largest contributor with 14.1 percent, after 62.1 percent from Malaysia, led by a strong commercial and consumer banking franchise.

Maybank has also been ramping up on regionalisation and building presence in all 10 countries in ASEAN, Hong Kong, London, New York, emerging markets of China and India, Middle East, Saudi Arabia as well as opportunistic markets of Papua New Guinea, Pakistan and Uzbekistan.

Notably, Maybank’s 2014 strategy will be focused in ASEAN and Indochina.

While global economic outlook is expected to be heavily influenced by the performance of major economies and ASEAN’s growth trends will likely be mixed, Maybank will continue to fine-tune and execute its plans to achieve its growth targets.

Company Profile
Maybank is one of South East Asia’s largest financial services firms. The company operates in Malaysia, Singapore, and the Philippines and numerous other countries. The company is Malaysia’s largest financial services firm and serves over 22 million customers.

Maybank has operations in more than 20 different countries with 2,200 different branch offices. Maybank is a leader provider of banking services, consumer loans, business loans and financing, and Islamic banking.

Financial Highlights
Maybank has enjoyed solid financial growth over the last few years. In Malaysia, Maybank enjoyed a net income of RM10.9 billion in FY12 and RM12.2 billion in FY13.

In Singapore, the company saw its net income grow from RM2.5 billion to RM2.7 billion from FY12 to FY13.

Maybank enjoyed even stronger growth in its profits before taxation. In Malaysia, the company generated RM5.5 billion in profit before tax in FY12 and by FY13, the said profits had grown to RM6.2 billion.

In Singapore, profits grew from RM1.1 billion to RM1.3 billion over the same time frame.

In Indonesia, Maybank actually saw its net income from FY12 to FY13 drop marginally from RM2.52 billion to RM2.51 billion. Profits before tax, however, rose from RM554.2 million to RM658.6 million.

In FY13, community financial services was the biggest contributor to net income, contributing RM7.3 billion. Global banking was the second biggest contributor to net income, contributing RM5.5 billion, while international banking contributed RM5.3 billion.

    Key Developments

  • Maybank allocated RM1 billion to support small and medium enterprises (SMEs) through a special loan programme to tap into the retail SME segment, which is expected to register a 30 percent loan growth, up from 23 percent last year.
  • Maybank is considering to list on the Philippines stock exchange due to increasing importance of the country’s financial services sector as well as raising its network to a total of 90 branches by end-2014.
  • The company will offer Ringgit Trade Financing in China which will allow Chinese and Malaysian companies to directly settle deals in ringgit and would reinforce its position in China as the only Malaysian bank appointed by China’s central bank as the market maker for the Ringgit/Renminbi.
  • Company’s Singapore loan portfolio grows to record $30.9 billion with business loans leading the way.
    Brokers’ Recommendations & Catalysts

Investor outlook remains mixed for Maybank . AmResearch has issued a “Hold” for Maybank, with a starting price of RM9.59 and a target price of RM9.90.

Kenanga Research has also issued a “Hold”, but puts its target price at a solid RM10.40, which would represent growth of 6.78 percent from a starting price of RM9.74.

MIDF, on the other hand, is more optimistic and has issued a “Buy” for Maybank. MIDF has set its target price at RM11.00, noting that Maybank met expectations for 2013 and strong loan growth should help the company expand.

HwangDBS Research has also issued a “Buy” and set its target price at RM11.80.

Based on similar sentiments, Hong Leong Investment Bank (HLIB) has also issued a “Buy” and set an even more optimistic RM11.98. HLIB believes that domestic growth within Malaysia and regional expansion will both propel Maybank to higher grounds.

Maybank Price Chart

This article is brought to you by Bursa Malaysia Berhad. The research in this article was conducted independently by Pioneers & Leaders (Publishers) Pte Ltd (“Pioneers & Leaders”) and the views and opinions expressed in this article are Pioneers & Leaders’ own and do not represent the views and opinions of Bursa Malaysia. Bursa Malaysia does not warrant or represent, expressly or impliedly as to the accuracy, completeness and currency of the information in this article. In no event shall Bursa Malaysia be liable to the reader or any other third party for any claim howsoever arising out of or in relation to this article.
This is a co-written article of Shares Investment, which lays out the analytical ideas and thoughts of the authors, who are well versed in investments and market concepts.

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