Malayan Banking Berhad (Maybank) is the largest financial group in Malaysia with a strong presence across the ASEAN region particularly in Singapore and Indonesia. It is also the largest listed company on Bursa Malaysia by market capitalisation as of June 2022.
Maybank is a household name in Malaysia and is well-known for its user-friendly digital banking features. In terms of mobile and internet banking transaction volumes in Malaysia, it owned the lion’s share at 56.3% and 49.6% respectively in 2021. Almost half of the banking transactions in Malaysia were conducted involving Maybank.
Here are 10 things I learned from the 2022 Maybank AGM.
1. Net operating income increased marginally by 2.8% to RM25.5 billion year-on-year. The improvement was due to higher net fund-based income as a result of the 22-basis-point expansion in its net interest margin to 2.32% in 2021. Notably, low-cost current and savings accounts (CASA) grew 17.2% year-on-year while the CASA ratio grew from 42.8% in 2020 to 47.1% in 2021.
Maybank’s performance was dragged down by its lower net fee-based income resulting from ‘lower realised securities disposal gains’ and mark-to-market losses of bonds and sukuks held by its insurance arm as well as ‘unrealised losses in equity shares by its insurance and investment banking units’.
In the current increasing interest rate environment, a 25-basis-point increase in the overnight policy rate (that the bank references its base rate to) will lift the bank’s net interest margin by another one to two basis points (bps). The net interest margin may expand by up to five bps in 2022.
2. Net profit surged 24.9% year-on-year to RM8.1 billion in 2021 on reduced provisioning. Provisioning for net impairment losses dropped 36.6% year-on-year to RM3.2 billion in 2021 due to higher and pre-emptive prudent provisioning made in 2020 on the back of potential bad loans and financial investments. The proportion of the bank’s non-performing loan to gross loans dropped from 2.0% in 2020 to 1.3% in 2021. The top-line growth coupled with contained overheads resulted in its positive jaws ratio in 2021.
3. Return on equity is expected to hover between 9.5% and 10% in 2022. Maybank recorded a decade-low cost-to-income ratio at 45.3% in 2021 and aims to keep the ratio between 45% and 46% in 2022. Its dividend payout ratio ranged between 70% and 100% in the past decade and is still sustainable and should not be a worry to investors.
|Return on equity||8.1%||9.8%||13%-15%|
|Dividend payout ratio||91.2%||84.5%||40%-60%|
|Net credit charge off||88 bps||51 bps||40 bps-50 bps (2022)|
4. In 2022, Maybank continues to offer targeted repayment assistance programmes to corporate and retail customers who are still reeling from the impact of the pandemic as the economy reopened. The total amount of approved consumer, business, and corporate loans remained under relief measures stood at about RM85.1 billion in 2021. It expects its assets quality to remain sound in 2022.
5. Minority Shareholder Watch Group pointed out that Maybank Indonesia’s total loans contracted for three consecutive years between 2019 and 2021 as a result of the weak performance of its community financial services (CFS) business. The management explained that the poorer result was due to the pandemic as the bank de-risked and reprofiled its non-retail loans in the CFS business. The segment is gaining business traction in 4Q2021 and is expected to continue its positive trajectory into 2022. Maybank Indonesia also underperformed in terms of loans growth compared to its local peers in 2021.
|Maybank Loans Growth (2021)||Industry Loans Growth (2021)|
6. The management explained to Permodalan Nasional Berhad that the increase in Maybank Indonesia’s gross impaired loan ratio from 5.10% in 2020 to 5.14% in 2021 was due mainly to lower loan balances. Majority of the impaired loans came from the retail SME segment as business activities were dampened by movement restrictions.
7. Similar to some other banks, Maybank did not opt for a digital banking license as it is already a full-fledged bank that offers a full suite of digital banking services. The outgoing GPCEO no doubt played an important role in spearheading the digitalisation and sustainability initiatives of the group.
Maybank continues to consolidate and reposition its branches to meet customer needs, thereby improving the effectiveness and profitability of these branches. Its assessment on digital banks indicates that digital channels and branches are both essential to help establish scale in the region.
8. Following the recent fallout of oil and gas companies like Sapura Energy and Serba Dinamik, the management did not comment on the bank’s exposure to these individual companies. The bank’s exposure to the oil and gas industry was minimal at 1.9% in 2022, while the loan exposure to the tourism industry including the cruise sector was just 0.4%.
9. Maybank has no branches in Russia and does not plan to have direct exposure there in line with its risk appetite. However, it is indirectly impacted by the Ukraine-Russia war as the war slows global economic recovery and causes further inflationary and cost pressures to both businesses and consumers. Further, it does not plan to venture into any other new geographical markets. Instead, it will continue to grow its profitability across its home markets and focus on capturing trade flows within ASEAN and Greater China.
10. The management added that that the bank had no security breaches in Malaysia in the past 12 months. Banking fraud cases seen or shared on social media or reported by the media were said to be situations whereby the customers divulged (unknowingly or knowingly) their banking details with third parties.
The fifth perspective
Maybank will focus on fee-based income to grow its income as it is expanding from a credit intermediary to an investment one. It is poised to benefit from the rising interest rate environment as its net interest margin expands.
Further, the economies of Malaysia and Indonesia are expected to rebound strongly in 2022 which bodes well for Maybank. Singapore will also grow moderately given its faster recovery than the other two in 2021. The bank’s short-term future looks bright.
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