The Maybank Group today announced net profit attributable to shareholders of RM1.81 billion for the nine months ended 31 March 2009 compared to RM2.23 billion in the previous corresponding period. Group pre-tax profit was RM2.50 billion compared with RM3.07 billion recorded previously.
Total revenue for the Group was higher at RM7.22 billion compared to RM6.65 billion in the corresponding period last year.
The performance for the nine months translates into an annualized net return on equity of 12.1% with net assets per share at RM4.22 as at 31 March 2009.
Summary of Performance
The lower profit for the nine months was primarily due to:
- Lower operating performance by the investment banking group reflected by a decrease in pre-tax profit by RM78.3 million, arising from lower capital market activities in Malaysia.
- Lower investment income and higher claims at the insurance and takaful business which showed a decrease in pre-tax profit by RM80 million.
- Higher loan loss provisions by RM464.4 million mainly due to the incorporation of BII operations as well as provisions in domestic and other International operations.
- Impairment cost of RM242 million made for MCB Bank in the first quarter of FY09.
- Higher interest expense following the issuance of capital securities and subordinated debt of RM9.1 billion.
- Foreign exchange marked-to-market losses of about RM193 million to fund the BII acquisition.
The Group, however, continued to show strong performance overall particularly in its domestic commercial banking franchise which remained resilient in the face of a slowing economy, demonstrated by, amongst others:
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Better asset quality with lower net NPL ratio of 1.73% compared to 1.92% at end June 2008.
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Improved revenue across most business segments
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Continued loans growth across all consumer and corporate banking segments with the exception of the SME sector which was affected by lower exports especially from manufacturing companies
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The Singapore operations continued to demonstrate strong performance registering an operating profit of S$258.1 million compared to S$201.5 million in the same period last year.
Financial Results
Net income for the nine months rose 8.7% to RM7.22 billion from RM6.65 billion previously. This was underpinned by growth in revenue across almost all business segments including Islamic banking (+31.2%), corporate banking (+28.9%), investment banking & treasury (+28.7%), consumer banking (+3.9%), insurance (+5.1%) and international operations (+51.9% - including BII).
Net interest income for the Group rose 6.9% on the back a 16.9% annualised loan growth. The net interest margin on interest earning assets improved to 2.79% in the March 2009 quarter from 2.72% in the previous corresponding quarter due to a larger reduction in the cost of funds of customer deposits relative to the lending yield.
For the Group's Malaysian operations, annualised loans growth for the period stood at 8%. Overall consumer loans grew by 6.5% led by increases in credit card receivables (+15.6%), automobile financing (+9.6%), securities (+2%) and mortgages (+1.7%).
Loans to the business sector grew 9.2% driven by strong corporate loans growth but offset by a contraction in SME loans. Strong demand was also recorded in Islamic automobile financing and securities financing while income from investment and deposits were also higher during the period.
Loans growth for Maybank's overseas operations (excluding BII) grew 39% on an annualized basis with Singapore operations registering a 7.0% rise (in Singapore Dollar terms). Loans growth for BII was 9.3% year on year (in Rupiah terms).
The Group continues to benefit from its strong customer franchise. Transactional income from commissions, service charges and fees grew 11.7% for the period compared to the previous corresponding period. This was, however, offset by a drop in foreign exchange profit which resulted in total transactional income growing by 4.5%.
Overheads, however, increased by RM906.3 million or 29.0% compared to the corresponding period as a result of consolidation of BII costs. If the overhead cost of BII were excluded, the increase would only have been 14.6%. When compared to the preceding quarter ended December 2009, growth in overheads for the third quarter of the Group ended March 2009 was flat, reflecting the success from the ongoing cost-containment efforts.
Total assets of the Group increased 19.7% on an annualized basis to RM308.8 billion driven by a 17.1% rise in net loans and a 62.7% increase in securities portfolio. Total customer deposits grew by 17.5% to RM211.7 billion.
The Investment Banking group recorded a lower profit before tax of RM41.1 million for the period compared with RM119.4 million due to lack of capital market activities as well as the lacklustre trading volume in the stock market.
The Insurance & Takaful group was also impacted by lower premium and investment income as well as higher claims which resulted in its pre-tax profit declining to RM84.1 million from RM164.2 million previously despite an increase in premiums earned.
The Treasury business of the Group saw a sharp increase in pre-tax profit to RM891.2 million compared with RM550.1 million previously.
The Group's international operations saw robust growth of 26.8% and 28.7% respectively in income and operating profit. This was, however, offset by provisions which saw total pre-tax profit declining by 36.7% to RM222.4 million.
Maybank's Singapore operations saw operating profit rise 28.1% for the nine months to S$258.1 million supported by strong increase in fund based income. Profit before tax, however, declined marginally by 1.9% to S$158.8 million due to higher provisions resulting from the tougher operating environment.
The Group's Indonesian banking subsidiary, BII, recorded a 9.1% growth in operating profit. However, provisions rose 78% in line with the conservative approach adopted by BII and the continuing stringent measures emplaced to strengthen asset quality in line with the expectations set by Maybank.
Asset Quality
The Group registered further improvement in asset quality with net NPL ratio at 1.73% as at end March 2009 compared with 1.92% in June 2008. Loan loss coverage rose further to 101.5% compared to 99.2% in June 2008.
The Group's risk weighted capital ratio stood at 12.10% as at March 2009. However, following the completion of the rights issue on 30 April 2009, the risk weighted capital ratio for Group stood at 14.76% at the end of April 2009. At Bank level, the risk weighted capital ratios were 11.1% and 14.25% as at March 2009 and April 2009 respectively.
The Group is currently in the midst of carrying out a Purchase Price Allocation (PPA) exercise in accordance with FRS3-Business Combinations, to allocate fair values to the tangible assets, liabilities, contingent liabilities and identifiable intangible assets of BII.
The Group expects to finalise its goodwill impairment analysis during the fourth quarter of financial year period ("FQP") ending 30 June 2009 and anticipates that the results on the full impairment charge will be announced in the FQP ending 30 June 2009.
Strategic Transformation
The Group has since September 2008, launched an aggressive performance improvement programme, LEAP 30, to enhance its competitive edge. To date, the Group has recorded an improvement in revenue generation and cost optimization through various pilot programmes to stimulate sales and deepen the share of the customer wallet.
To date, the first wave of LEAP 30 programme has yielded encouraging results with additional revenue of RM38 million generated and IT cost avoidance totaling RM79.7 million. The Wave 1 of the procurement cost optimization has resulted in anticipated annualized savings of RM11 million.
Comments from Maybank Chairman, Tan Sri Mohamed Basir Ahmad
While the results for the period were lower than previously, the underlying operations of the Group remained strong as it recorded increased revenue and improvement in asset quality, as well as healthy loans growth during the period.
Our Islamic banking operations, in particular, showed resilient growth. We believe that there are ample opportunities to sustain this trend and further strengthen our leadership position as the largest Islamic banking player in Asia Pacific.
Comments from Maybank President and CEO Dato' Sri Abdul Wahid Omar
It has been an extremely challenging time for us given the impact of what took place in the global financial environment and the current economic slowdown. We are seeing lower profit performance impacted largely by higher provisioning for our international operations given the tougher operating environment and impairment costs resulting from our recent regional acquisitions. Moving ahead, our focus will be on capturing value from these acquisitions and strengthening the performance of our investment banking and insurance operations.
We are confident that the strategies which we have put in place in the last year particularly for strategic transformation group wide to secure greater leadership both in Malaysia and the region as well as our strong commercial banking franchise, will position us well to face the challenges of the future and seize on yet more opportunities for greater growth and better performance.