The Maybank Group today announced Group profit after tax and minority interest of RM2.93 billion for the financial year ended 30 June 2008, 7.9% lower than the RM3.18 billion recorded in the previous financial year.
Group pre-tax profit was also lower by 6.4% at RM4.09 billion compared with RM4.37 billion recorded in the previous financial year.
The results translate into a net return on equity of 17.3% after deducting for deferred taxation while earnings per share stood at 60.08 sen
The Board of Directors has proposed a final dividend of 20 sen per share less 26% income tax to be paid on 21 October 2008, bringing the dividend payout ratio for the year to 60.4% of Group net profit.
Overview of Results
Maybank Chairman Tan Sri Mohamed Basir Ahmad said the results of the Group are satisfactory given the more challenging business environment and was in line with expectations. While revenue for the period rose by 6.4% to RM16.2 billion from RM15.2 billion last year, operating profit grew marginally by 6.1% to RM5.38 billion compared with RM5.07 billion previously. This was mainly due to two factors namely the rising costs on the back of one-off staff compensation adjustments, higher marketing expenses, IT investments and the provision of RM 483.8 million for the non-refundable deposit paid for the acquisition of up to 100% equity in Sorak Financial Holdings Pte Ltd, the controlling shareholder of PT Bank Internasional Indonesia Tbk following the revocation of approval by Bank Negara Malaysia on 29 July 2008. The impact of the RM483.8 million provision is particularly mitigated by the gain on foreign exchange of RM193 million SGD funds placement in relation to the balance purchase consideration for the acquisition of Sorak.
Tan Sri Mohamed Basir said the Group decision to make the provision was consistent with Maybank’s stringent provisioning policy and prudent risk management.
Net interest income grew by RM293.9 million or 5.7% compared to the previous year. Net interest margin remained stable at 2.71% compared with 2.73% in the previous year. In particular, the deposit mix improved slightly with demand and saving deposits representing 36.3% of our total deposit base compared to 35.9% last year.Non-interest income grew by RM375.8 million, or 13.1% as a result of higher income from commissions, transactional fees and foreign exchange gains.
Income from Islamic Banking operations grew 12.5% to reach RM964.6 million from RM857.6 million previously. The Group remains a leader in Islamic banking with a 27% market share in assets, 23% in overall financing and 18.2% share in deposits.
Gross loans for the Group increased by RM23.7 billion or 16.1% for the financial year, with growth from both the consumer and business sectors.
For the Malaysian operations, overall loans growth was 12.1%. Consumer loans as a whole grew 8.8% with a 28% increase in automobile financing and 21% rise in credit card receivables. Business loans also grew by 15.3% while SME loans increased by 21%.
The Group’s investment banking business was impacted by the challenging market conditions which resulted in fewer business opportunities for the Group. In addition, the previous corresponding period had included the sum of RM52.5 million which was received for the surrender of the licence of Mayban Discount.
The insurance arm of the Group recorded an improvement in profit before tax of 18% to RM339.7 million on the back of higher investment income as well as from cost efficiency benefits arising from the merger under the Etiqa brand.
The Group’s international operations continued to record strong growth with pre-tax profit rising 18% to RM879.7 million from RM744.5 million previously, with the Singapore operations contributing 64%.
Loans growth was robust at 27%, with key contribution from the Group’s Singapore operations which saw a 32% rise, mainly owing to an increase in mortgages and automobile financing as well as construction loans. Other strong growth locations were Vietnam (which saw profit before tax quadrupled on the back of a 40% growth in loans), Philippines (profit before tax grew 174% and loans were higher at 12.3%) and London (profit before tax grew 82% and loans by 50%).
“The strong performance of our international business echoes our aspirations to become a regional financial services leader and clearly reflects the robust infrastructure that has been in place over the years for regional expansion and to compete globally,” Dato’ Sri Abdul Wahid said.
Pre-tax profit from international operations increased to over 21% of Group profit compared with about 17% last year, well ahead of the target of 20% set for international operations’ contribution to the Group by 2009/2010. Loans from international operations also increased, reaching 29% of total Group loans, from 26% previously.
Total assets of the Group increased 4.8% to RM269.1 billion compared with RM256.7 billion in June last year while total deposits from customers rose by RM23.4 billion to reach RM187.1 billion.
Group asset quality continued to improve steadily with total non-performing loans declining by RM1.79 billion to RM6.47 billion from that at 30 June 2007. The net NPL ratio of the Group as at 30 June 2008 fell to 1.92% compared with 3.03% in June 2007. Loan loss coverage rose further to 99.2% against 80.3% in June 2007. The risk weighted capital ratio of the Bank as at 30 June 2008 (after payment of dividends) stands at 12.09%.
Prospects and Strategy Forward
The prospects of rising inflation coupled with slower economic growth amid a moderation in external demand present a challenge for the banking industry in Malaysia and other regional economies where Maybank is expanding its overseas presence. However, with its well-established risk management framework and prudent business practices, the Group is expected to leverage on its strengths to cope with these challenges. By entrenching its dominant presence and working towards adding value to its overseas businesses, the Group expects to record a stable performance for the financial year 2008/2009.
To secure its leadership in this increasingly challenging and competitive environment, the Group is pleased to announce that it is embarking on a holistic performance improvement programme to realign operations, processes and people resources.
This programme is aimed at further strengthening the Group’s market position across all core business segments and to lay a strong foundation for the Group to achieve its aspiration to be a leading regional financial services company by 2015.
The Group has completed an intensive reassessment of its business and operations to identify gaps and challenges in the operating model and environment. Taking into consideration macro-economic factors such as intensifying competition, heightened customer sophistication and therefore changing operating requirements, the Group will launch a group-wide change initiative focused on 3 strategic thrusts:
1. Secure Maybank’s position as the undisputed leader in financial services in Malaysia.
2. Strengthen its regional presence through enhancing operations in 7 out of 10 Asean countries that it is already operating in while continuing to look for opportunities in lucrative growth markets in the region.
3. Maybank to become a talent and execution focused financial services organisation.
Outlining the strategic plan to the media today, Dato’ Sri Abdul Wahid Omar said, “We firmly believe that the aspiration to be a leading regional financial services group is built on the premise that you must first be the undisputed domestic leader. Maybank is Malaysia’s financial services leader and we are excited with the prospects we have ahead of us.”
“Key to our success will be our ability to move fast and turn around critical areas which need improvement and to efficiently optimize our best resources and talent to successfully deliver innovative financial solutions and service excellence to our customers,” he added.
Set to be launched in September 2008, the programme will be implemented in two horizons right up to the year 2015. In the first horizon reaching up to 2011, the focus will be on thirty initiatives touching upon all of Maybank’s major business sectors, including consumer, enterprise, Islamic and investment banking, operations and talent development.
This programme named Leap 30 will include 17 business initiatives, 6 talent initiatives and 7 enabling initiatives. The initiatives will be rolled out rapidly with results consistently tracked and measured to ensure continuous innovation and change in current practices. The business initiatives are targeted at significantly improving revenue growth in priority segments and to enhance cost and capital efficiency of the Group. In the area of human capital development, the Group has set its sights on upgrading its talent pool and continuing to strengthen its performance culture. Top priority among the enabling initiatives will be the re-emphasis on being customer focused in all areas of operations and to take customer service to a greater level of excellence.
The Group will review quarterly its progress in this initiative and report on key milestones and achievements.