Maybank Group today announced profit after tax and minority interest of RM572.2 million for the three months ended 30 September 2008. The results include a maiden profit contribution of RM23.1 million from its 20% associate company, MCB Bank Ltd, Pakistan.
Group profit before tax for the period was RM881.8 million compared with RM1.01 billion in the corresponding quarter.
The Group results translate into a net return on equity of 11.7% while earnings per share for the quarter stood at 11.72 sen.
Performance Overview
Maybank Chairman Tan Sri Mohamed Basir Ahmad said, "Despite the lower profit recorded for the quarter, the Group remains strong in terms of its total asset quality which improved steadily, clearly reflecting its strong fundamentals and resilience in all economic cycles. The net non-performing loan ratio for the Group strengthened to 1.84% from 1.92% in June 2008. In addition, loan loss coverage improved to 100.2% as at September 2008 compared with 99.2% in June 2008.
Net interest income for the quarter was marginally lower by RM46.6 million or 3.6% to RM1.27 billion compared to the previous corresponding quarter. The lower net interest income was due mainly to lower income from deposits placed with financial institutions and securities portfolio, and recoveries from non-performing loans which were lower by RM196.0 million (-18%) and RM23.4 million (-31.3%) respectively. However, these were partly offset by an increase of RM120.5 million (+6.78%) in interest income from loans, advances and financing. Interest income was also affected by a slight drop in average lending rates. Net interest margin for the quarter was 2.5%, lower than the 2.8% recorded in June 2008.
Non-interest income for the quarter (including marked to market gain/loss of derivatives and securities held for trading) was lower by RM131.5 million or 21.5% compared to that of the previous corresponding quarter. For the period under review, the lower non-interest income was impacted by foreign exchange loss of RM125.2 million compared to a profit of RM123.2 million in the previous corresponding quarter. This was mainly attributable to the reversal of the foreign exchange gain of RM193 million reported in the previous financial year from the Singapore Dollar placement in relation to the purchase consideration of PT Bank Internasional Indonesia Tbk (BII). The gain on foreign exchange is now recognized as part of acquisition cost following the successful acquisition of BII.
Excluding the reversal of the RM193 million, the Group's foreign exchange activities would have recorded a gain of RM68.2 million. The lower foreign exchange gain was due to losses in exchange arising from general foreign currency funding activities.
Notwithstanding this, income from the Group's strong consumer banking franchise continued to show a rise, with income from transactional banking for the quarter under review growing to RM651.3 million from RM642.7 million previously.
Overheads for the quarter just ended increased by RM207.3 million or 20.5% over that of the previous corresponding period due to higher personnel and marketing costs as well as administration and general expenses.
Personnel costs increased by RM115.8 million or 26% mainly due to salary revisions, including adjustments for previous quarters, for officers and clerical staff under the respective finalised collective agreements, while marketing costs increased by RM11.2 million or 11% as a result of higher provisions made for credit card sales and promotions. Administration and general expenses increased by RM66.1 million, from RM281.4 million to RM347.5 million or 23.5%, mainly due to increase in claims incurred and other administrative and general expenses such as cash processing fees and royalties paid for the increased cards and treasury businesses and higher utility bills due to increase in tariff rates.
As a result, operating profit for the period decreased from RM1.12 billion to RM809.3 million, or a reduction of 27.9%.
In the period under review, the Group's profit before tax was impacted by impairment losses in an associated company of RM242 million and higher allowance for losses on loans, advances and financing of RM84.1 million due mainly to the lower specific allowance written back. However, this was partly offset by the write-back of allowance for the non-refundable deposit of RM483.8 million in the financial statements arising from the completion of the acquisition of Sorak Financial Holdings Pte Ltd ("Sorak"), the controlling shareholder of BII.
Among the business groups, the investment banking group recorded a lower pre-tax profit of RM16.1 million compared to RM40.7 million previously, largely due to lower contribution from the stock broking business and the one-off exceptional recoveries that were recorded in the previous corresponding quarter. The insurance & takaful group also recorded lower pre-tax profit of RM15.4 million compared to RM66.8 million previously, mainly due to higher group insurance claims and provisions for diminution in value of investments.
For the quarter, Consumer Banking revenue grew by 2.1% while Corporate, Business and Treasury registered revenue growth of 6.3%. International Banking showed revenue growth of 6.0%. The Group's Islamic banking operations recorded steady growth of 34.6%.
Excluding BII, the Group registered overall loan growth year-on-year of about 16.4%. For the Malaysian operations, loan growth year-on-year was about 13.4%, led by business loans, which rose 19.5% and consumer loans, which increased 7.3%. Strong growth was also seen in automobile financing of 27.5% and card receivables which grew by 21.1%.
The Group's international operations contributed 34.8% of total Group loans, higher than the 27.2% recorded previously. Maybank Singapore saw loans grow by 14.2% on Singapore Dollar basis.
Total assets of the Group increased to RM304.4 billion, higher by 13.1% compared to RM269.1 billion recorded in June 2008. Customer deposits rose 9.5% to RM204.9 billion compared to RM187.1 billion in June 2008. These were mainly attributable to the inclusion of BII assets and deposits, which stood at RM23.3 billion and RM16.7 billion respectively, as well as growth in assets and deposits of Maybank, which rose by RM14.1 billion and RM1.6 billion respectively.
The risk weighted capital ratio of the Bank as at September 2008 stood at 10.76% compared to 12.09% as at June 2008.
Prospects
The deteriorating financial and economic situation in the United States has raised the risk of a more pronounced downturn in other industrialised and developing economies. As a result, Malaysia's economic growth could be slower than previously expected due to sluggish growth in exports and more cautious consumer spending, despite moderating domestic inflationary pressures following the reduction in fuel prices. The Government has recently lowered the GDP forecast of 3.5% for 2009, notwithstanding its introduction of various measures to cushion the economic slowdown.
Against the backdrop of a worsening economic scenario, the operating environment for the domestic banking sector is expected to become more challenging with prospects for slower loans growth and increasing risk of greater non-performing loans.
Maybank President and CEO Dato' Sri Abdul Wahid Omar said, "Challenges in the domestic market intensified following the global financial meltdown. As a Group, we are adopting a conservative outlook for the financial year ahead, focusing on strengthening our core areas of business to drive growth and building on our regional footprint to set the foundation for future growth."
The Group is implementing its LEAP 30 performance improvement programme, which was announced in August, to contend with the more competitive environment ahead. This will include initiatives to upgrade the commercial banking model, strengthen domestic corporate and investment banking products and reduce procurement costs.
Maybank Chairman Tan Sri Mohamed Basir added, "In the last financial crisis of 1998, Maybank remained profitable and continued to strengthen during that period. With a stronger balance sheet and better asset quality, we are in a much stronger position to remain profitable and ride through the impending economic slowdown."