Maybank

Maybank records higher interim net profit of RM1.88b; declares interim dividend of 11 sen per share

Maybank Group today reported its half-year financial results with profit after tax and minority interest (PATAMI) rising 43.5% to RM1.88 billion for the period ended 31 December 2009, compared to RM 1.31 billion in the previous corresponding period. Profit before tax for the Group was higher by 39% to RM2.56 billion compared to RM1.84 billion previously.

The robust performance was achieved on the back of significantly improved results across almost all business sectors. Growth in revenue reached 35.5% while return on equity stood at 14.6%, both exceeding the Group's headline KPIs of 8% and 11% respectively.

Domestically, consumer banking, global markets, corporate banking, insurance and investment banking sectors all registered improved performance. Internationally, Bank Internasional Indonesia (BII) has continued to gain from the momentum in business performance while Singapore also achieved better results on the back of an improving business environment.

The PATAMI translated into earnings per share of 26.5 sen per share for the half year compared with 23.76 sen previously (after adjustment for the rights issue completed in April 2009).

Asset quality continued to improve with the net non-performing loan (NPL) ratio declining to 1.43% from 1.64% in June 2009. The Capital Adequacy Ratio of the Group remained strong at 14.6% as at 31 December 2009.

Overview of Financial Results

The Group results include that of BII for the half year compared to the previous corresponding period in 2008 where results of BII were only included for the October-December quarter.

Performance for the half year was boosted by growth in net interest income and non-interest income, with net interest income increasing to RM3.3 billion compared with RM2.8 billion previously.

This was achieved on the back of annualised loan growth of 9.9% and an improvement in the net interest margin (NIM) to 2.77% compared to 2.70% in the preceding half-year. The increase in NIM was primarily due to lower funding cost, improved margins on loans and lower cost of customer deposits.

Non-interest income rose 78% compared to a year ago driven by the Group's better commercial banking performance which saw commissions, service charges and fees rise by 41% and a three fold rise in forex profit as well as investment and trading income.

Overhead costs for the Group (excluding claims) increased by 24.2% over that of the previous corresponding period. When compared on the basis of the second quarter, overhead costs only rose 5.5% in 2009 compared to 2008.

Allowance for losses on loans, advances and financing stood at RM661.3 million for the half year compared to RM506.5 million previously. For the second quarter ended December 2009, however, loan loss provision was lower at RM243.6 million compared to RM321.1 million in the corresponding quarter in 2008.

Overall, the Group's loan loss coverage continued to improve, reaching 117.8% in December 2009 from 112.9% in June 2009.

Loans, Deposits & Assets

The Group saw encouraging loans growth, at 9.9% on an annualised basis during the half year from June 2009. The Malaysian operations registered an annualised loan growth of 8.8%.

Loans in the Malaysian operations were boosted by a 12.2% increase in overall consumer financing. This was mainly driven by double digit growth in retail financing (+18.1%), automobile financing (+12.5%) and credit card receivables (+16.9%). The Group's efforts in expanding its mortgage business continued to bear fruit registering 9% annualised growth during the half-year. Overall business loans grew 5.6% annualised, led by corporate loans which rose 12.4%, while SME loans registered a contraction of 9.7%.

Total deposits from customers grew at a rate of 11.8% from a year earlier to reach RM230.9 billion, with growth across all deposit segments namely savings deposits (+14.8%), current accounts (+15.4%) and fixed deposits (+8.2%).

On a Group basis, deposits grew at a faster pace than loans, resulting in the loan-to-deposit ratio improving to 84.5% in December 2009 compared with 87.4% in June 2009. Total assets increased by 12.9% to reach RM330.8 billion as at December 2009.

Sectoral Review - Highlights

Consumer Banking

Maybank's strong market position remains. Revenue for the half year increased by 9.3% to RM2.19 billion. Leveraging on the strong brand presence and wide distribution network, housing loan volume more than doubled to RM1.41 billion compared to RM623 million in the previous corresponding period. In the automobile financing segment, despite the slowdown in industry vehicle sales during the last year, market share rose to 17.3% from 16.2%.

The Group exceeded industry growth rates during the half year for growth in card base (+4.4% vs -0.2%), billings (12.2% vs 6.9%), receivables (+8.3% vs 5.3%) and merchant sales (+23.9% vs 4.9%).

Maybank2u.com continues to retain its position as the leading internet banking portal for online banking transactions. Maybank2u has 4.34 million registered users and 1.32 million active users, recording over 51 million monthly transactions with a monthly value of over RM3.6 billion.

Business & Corporate Banking

Revenue for this sector increased to RM1.26 billion compared with RM1.17 billion previously. This was contributed by a 37.1% growth in non-interest income to RM254.4 million as well as a 2.5% rise in interest income to RM1.01 billion. In the SME segment, the Group was able to moderate the decline in loans during this period to 9.7% from 11.4% previously.

The sector has a diversified loans portfolio with 27% in finance, insurance and real estate, 22% in manufacturing, 16% in construction, 12% in wholesale and retail trade, 8% in transport and communication and 7% in utilities, amongst others.

Global Markets

Revenue from Global Markets increased 48.7% to RM772.4 million for the half-year period compared to the RM519.6 million recorded previously.

The performance was largely attributed to gains from trading and investment activities in fixed income securities which resulted in non-interest income rising to RM484.7 million during this period compared to RM230.0 million previously.

Islamic Banking

Maybank continues to maintain its leadership in Islamic banking in Malaysia with total Islamic assets at December 2009 at RM38 billion or 19.2% higher than at June 2009.

Islamic banking operations registered an 18.9% increase in gross attributable income to RM899.5 million from RM756.7 million previously. This was on the back of a 35.5% rise in financing which was supported by an increase of 27.7% in automobile financing. However, net profit was marginally lower at RM185.9 million compared to RM189.2 million due to higher provisions and lower income from investments.

Investment Banking

The investment banking operations has benefited from the improving capital market environment, recording a 75% rise in total income for the half-year under review, which was driven by a tripling in fee-based income, excluding gains from sale of investment in fixed income securities. Total revenue for the half-year increased by 29% to RM137.9 million while pre-tax profit jumped 157% to RM103.5 million from RM40.3 million previously.

Maybank Investment Bank continues to move up in industry rankings reinforcing its position among the top investment banks in the country. It recently clinched the top spot in the MARC Lead Managers League Table 2009 for Number of Issues handled. It is also ranked second by market share in underwriting, fund raising and debt capital markets. The bank's brokerage division is ranked fourth in broking market share.

Insurance & Asset Management

Pre-tax profit rose more than four-fold to RM175.4 million from RM 39.2 million previously. The better performance was mainly due to higher gross premium which grew 16% and an improvement in overall loss ratio which declined to 56.2% from 62.8%.

Etiqa stands No. 1 in combined insurance and takaful business for the life/family new business segment as well as for gross premium written in general insurance.

Life/family gross premium grew 18% while premium from general insurance rose 13%. Third party bancassurance and agency channels were the two growth drivers for premium income with the agency force expanding by 51% during the period.

International operations

The Group's international operations, led by Singapore and Indonesia, continue to show sustained growth, contributing close to 30% of profit before tax. Loans at the international operations saw healthy increase of 12.3%, and currently comprises 33% of total Group loans.

Revenue from international operations almost doubled to RM1.88 billion in the half-year compared to RM945.8 million previously.

Bank Internasional Indonesia (BII)

Net interest income at BII rose 19% to Rp 1,608 billion from Rp 1,352 billion previously. This was on the back of strong loan growth of 23.5% as well as higher NIM of 6.32% as at December 2009 compared with 6.11% in June 2009. Asset quality remained good with the net NPL ratio at only 0.8%. The loan book expanded by 23.5% on an annualised basis to Rp 39.6 trillion, from Rp 35.5 trillion.

WOM Finance recorded a net profit of Rp 22.72 billion for the second quarter of the half-year compared with Rp 22.49 billion in the first quarter. Loan portfolio quality, meanwhile, continued to improve with the monthly delinquency rate falling further to 5.9% in the second quarter of the half year compared with 8.7% in the preceding quarter.

At the Group level, Maybank reported a pre-tax profit of Rp 554 billion and net profit of Rp 457 billion for BII in the half-year. This compared to the pre-tax profit of Rp 127 billion and net profit of Rp 103 billion recorded in the October-December 2008 quarter. The results exclude loan loss provisions on specific accounts which had already been accounted for at the Group level in the last financial year as part of the purchase price allocation exercise following the acquisition of BII.

BII Rights issue

BII has announced its intention to embark on a rights issue exercise to raise gross proceeds of up to USD 150 million or RM 513.5 million equivalent. The proposed rights issue exercise has been approved by the Board of BII on 8 February 2010 and is expected to be completed by end of April 2010, subject to the appropriate approval from shareholders and regulators. Details of the rights issue such as ratio, discount and other relevant information will be announced in due course.

As the largest shareholder, Maybank intends to pursue the long term growth of BII and through additional capital injection, BII's future potential can be accelerated.

Singapore

Pre-tax profit at the Singapore operations grew 73.2% to SGD170.7 million from SGD98.6 million previously, despite marginally lower net income. Total loans now exceed the SGD 17 billion mark (growing 10.8% annualised) whilst maintaining excellent asset quality with the net NPL ratio falling to 0.09% from 0.18% previously. Loans to the corporate sector grew 8.8% on an annualised basis, while consumer loans rose 13.1% led by share financing which rose 40.8%, housing loans which grew 27.5% and automobile financing which increased by 1.6%.

Prospects

With Malaysia's economy continuing its growth recovery through 2010, Maybank's core commercial banking operations can expect to perform better in all segments. Improved consumer sentiments will fuel further growth in the area of consumer financing. Improving capital market activity, coupled with the Group's effort to build internal capability and capacity is expected to provide better performance for the investment banking and insurance divisions.

Whilst seeking to expand and regain market share in selected business segments, the Group will continue to be vigilant in ensuring asset quality is preserved. Prudent risk management practices and stringent asset quality management should contain the risk of deterioration in asset quality.

The Group's international operations are also expected to record better performance with greater global economic confidence. BII is expected to show much better growth in line with the vibrant banking sector in Indonesia and following new business strategies and initiatives by the BII management team to improve the information technology infrastructure, expand branch network and reinvest in people resources.

With the improving economic environment in the markets that we operate and the likely absence of any impairment charge (unlike that which was incurred in the financial year 2009), the Group expects its financial performance for the current financial year ending 30 June 2010 to improve significantly. Barring unforeseen circumstances, the Group expects the revenue growth and ROE to exceed the KPIs earlier indicated for financial year 2010.

Dividend

The Board of Directors of Maybank has declared an interim dividend payout of 11 sen per share less 25% income tax, a payout of 31.1% compared with 23.76 sen previously (after adjustment for the rights issue completed in April 2009). This means a payout of RM583.9 million. The dividend is expected to be paid on 16 March 2010.

Quotes by Maybank Chairman, Tan Sri Megat Zaharuddin Megat Mohd Nor

"The Board and I are happy that as we enter our Golden Jubilee year, Management has delivered this strong topline and profit performance for the first half of the financial year 2010. The greater focus in key areas is bearing fruits in the right places, from excellent segment results to encouraging trends in new opportunities pursued especially in our Indonesian operations.

With the improving economic environment in the countries we operate in, I can see the excitement amongst our people eager to create value in new ways for our customers. This bodes well for all stakeholders."

Quotes by Maybank President and CEO Dato' Sri Abdul Wahid Omar

"The half year results demonstrate Maybank's ability to leverage on inherent strengths and seize opportunities present in this globalised environment.

The strong performance across most of our business sectors reflect the broad based capabilities within the Group and the potential that we can achieve in the coming year.

We are especially pleased with the performance we are seeing at our international operations, particularly Singapore and Indonesia. We have set our sights for more dynamic growth in the years ahead and are confident of exceeding our key targets set for the year."