Maybank Again

Huge articles on Business Times on Maybank.

I was hardly impressed.

The article is published AFTER Maybank announced formally its rights issue dates.
First let's roll back what has happened so far. The following are the postings written on Maybank; Maybank Has Lost 24.1 Billion In Market Capital Since BII Deal!!!, More On Maybank PNB Is Saying Maybank rights a good buy

On today's business times: Maybank sees key businesses growing

• Maybank sees key businesses growing
  
  By Adeline Paul RajPublished: 2009/03/23
  
  Top lender Malayan Banking is counting on growth in consumer, Islamic and commercial banking to see it through the worsening economy
  
  Top lender Malayan Banking Bhd (Maybank) (1155) is confident it can grow its key businesses this year and the next despite a worsening economy, its chief said.
  
  President and chief executive officer Datuk Seri Abdul Wahid Omar said he was counting on growth in consumer, Islamic and commercial banking to see it through these troubled times.
  
  The group's insurance and investment banking businesses, however, are expected to falter given the weaker capital markets.
  
  "We're actually entering this recession, or crisis, with a strong balance sheet and strong asset quality. Even if our non-performing loans (NPLs) were to deteriorate further, we think we should still be profitable," he told Business Times in an interview.
  
  Wahid has warned, however, that the group's net profit in fiscal year ending June 30 2009 will be lower than last year's RM2.9 billion given the more challenging environment.
  
  He said the bulk of profit will continue to come from Maybank's traditional commercial banking franchise.
  
  The group, which is dominant in consumer banking, should also be able to continue to lead in this area.
  
  "No doubt, in some segments, we might see some increase in NPLs, but I think those increases will be manageable. If you look at our current net NPL ratio of 1.8 per cent, even if that doubles to 3.6 per cent it would still be manageable," he said.
  
  The industry's net NPL ratio is now about 2.2 per cent.
  
  Loan growth should be able to come in at about 6 per cent to 7 per cent this fiscal year, which is still "very good" considering the current environment, he said.
  
  Maybank's share price has fallen of late as investors worry that its move to raise RM6 billion via a rights issue will dilute earnings. It fell below RM4 last Monday, but has since been on the rise.
  
  Wahid said the move to strengthen Maybank's capital base was necessary
  
  and formed a key part of the group's ambition to become one of the top five banks in Southeast as well as South Asia come 2015.
  
  The group expanded last year, buying three banks in Asia for RM11.5 billion.
  
  "When we look at our requirements for the next three to five years, we felt that RM6 billion would be an appropriate amount. This is actually very much pre-empted and, with that, Maybank will be one of the best capitalised banks in this region.
  
  "Once we have enough capital, then there'll be no issue to be able to grow in the market, so that means that we'll be able to capture some loan growth, with much better margins," he said.
  
  Investors are also concerned that Maybank's dividends will now come in at a much lower level, but Wahid has given the assurance that the bank intends to stick to its long-term dividend policy of paying out between 40 per cent and 60 per cent of net profit.
  
  "For the current year we will have to review this indication, but for the long term we are committed to the 40-60 per cent range," he said.
  
  Banking analysts, like Fiona Leong of AmResearch, believe it may come in at as low as 25 per cent of net profit this year. Last year, it paid out 61 per cent.
  
  OSK Research's Keith Wee said Maybank was likely to conserve a large portion of its capital for potential impairment losses on its bank buys in Indonesia and Pakistan.
  
  These factors - lower dividends, potential impairment and the rights issue - continue to weigh on Maybank's stock. It has shed 15 per cent this year.
  
  Most analysts are recommending either a "sell" or "hold" on it, but at least two have called a "trading buy" as they believe it may have bottomed.
  
  While the group's three new bank purchases will provide it with a new source of income from this year, it will take a while yet to be earnings accretive given the higher interest incurred on the RM9.1 billion of capital that the group raised over the last six months, Wahid said.
  
  For now, Maybank, which is present in 14 countries, is taking a break from making further acquisitions and focusing on maximising organic-growth opportunities.
  
  It still wants to increase its stake in Vietnam's An Binh Bank by another 5 per cent to 20 per cent as per the subscription agreement, but is in no hurry to do so.
  
  As and when the Vietnamese government approves such a move, Maybank will be ready to act as the funds are already in place for it.
  
  Wahid also said that he was not overly concerned about Maybank's lower market capitalisation, adding that he would rather focus on fundamentals.
  
  "At this moment, given volatile markets, we're less concerned in terms of market capitalisation. We believe that if you focus on the fundamentals and deliver the results, your share price will take care of itself."
  
  Maybank, with a market capitalisation of some RM21.3 billion currently, saw its shares close at RM4.36 last Friday.

First let me repeat what's needed to be repeated.

Before the BII fiasco, Maybank's market capitalsation was some 43.6 Billion!

Now it is only some 21.3 billion.

Anyway, the group CEO said this:

• "We're actually entering this recession, or crisis, with a strong balance sheet and strong asset quality. Even if our non-performing loans (NPLs) were to deteriorate further, we think we should still be profitable,"

I wonder. If Maybank's balance sheet is truly really strong, why the rights issue is needed? Maybank had overpaid for the banks and isn't this why the rights issue is needed?

And since the recession and crisis was known way back last year, why did Maybank overpay for their purchases? Doesn't make sense right? Since it was a crisis, why couldn't Maybank bargain?

Now a rights issue is needed.

A rights issue which would see Maybank's share base increase from 4881million shares to 7077 million shares. And if earnings do not increase, the earnings would be diluted.

And what did Wahid warn?

• Wahid has warned, however, that the group's net profit in fiscal year ending June 30 2009 will be lower than last year's

Lower net profit is already expected.

And with lower net profit, how could investors logically expect more in dividends?

The CEO then said.

• "For the current year we will have to review this indication, but for the long term we are committed to the 40-60 per cent range," he said.

And what about the impairment losses?

Yeah, Maybank closed at 4.38 last Friday. When I first blogged Maybank Has Lost 24.1 Billion In Market Capital Since BII Deal!!!, Maybank last traded at 4.00. LOL! :p2

And here is the other article on Maybank:

• Longer wait to realise earnings-accretive BII
  
  By Adeline Paul RajPublished: 2009/03/23
  
  Malayan Banking Bhd's (1155) chief says it could take a longer-than-expected four years for its RM8.2 billion investment in Bank Internasional Indonesia to be earnings accretive.
  
  Maybank, which owns 97.5 per cent of BII, had told analysts when announcing the acquisition last year that it expected BII to start enhancing its earnings in the fiscal year ending June 30 2010.
  
  "With the RM8.2 billion that we paid, it will take a longer period for that investment to be earnings accretive. As to when, it very much depends on how fast we can grow the earnings, so it will not be within four years," Maybank president and chief executive officer Datuk Seri Abdul Wahid Omar told Business Times in an interview.
  
  For the deal to be accretive, earnings contribution from BII has to be higher than the cost of funding.
  
  Maybank's stock took a tumble upon the company announcing plans to buy BII last March, and again later when it concluded the deal in November.
  
  Banking analysts viewed the deal as being too expensive and said the timing was not right. It had, after all, bought 15 per cent of Vietnam's An Binh Bank and 20 per cent of Pakistan's MCB Bank earlier in the year.
  
  Today, BII shares are trading at some 44 per cent below the tender offer price, while MCB's market price is around 70 per cent lower than the acquired price.
  
  Keith Wee, an analyst at OSK Research, said Maybank might have to make a further impairment of between RM1 billion and RM1.9 billion this fiscal year for its investments in BII and MCB.
  
  "It's a drag on the stock," he remarked.
  
  Maybank had already made an impairment to the tune of RM242 million on its MCB investment earlier in the first quarter.
  
  Wahid, however, said Maybank was confident of continued profitability and that any further impairment would not lead to a loss in the group's net earnings for the current fiscal year.
  
  He is aware that he has an uphill task in making good on Maybank's three bank purchases last year, especially given the bleak outlook analysts are painting amid the weaker global economy.
  
  Its RM11.5 billion acquisition trail has had its share of challenges and criticism.
  
  "At the end of the day, from Maybank's and my personal perspective, we would like to move forward. We're not about to look back and try to justify at what prices the deal was done."
  
  He pointed out that his main challenge this year would be to follow through on the new bank buys and realise value from them.
  
  "Obviously, the primary focus of the three will be on BII given that it cost us RM8.2 billion out of the total RM11.5 billion that we spent on acquisitions," Wahid remarked.
  
  His first priority at BII is to assemble a strong management team.
  
  The new appointments, comprising new and existing talent, were announced last Friday.
  
  Ridha Wirakusumah, a former American International Group Inc (AIG) executive, was made the new president director of BII, subject to approval from Indonesia's central bank. He was AIG's head of Asia-Pacific consumer finance.
  
  Maybank has identified four immediate focus areas for BII's new team to improve on: credit-risk underwriting processes, its trade finance capability, the remittance business and Internet banking.
  
  In addition, it wants to support Malaysian and Singaporean businesses that have invested or intend to invest in Indonesia.
  
  Wahid said Indonesia was an important market with much potential for growth as the banking penetration rate was still low at less than 30 per cent compared with Malaysia's 98 per cent and Singapore's 102 per cent.
  
  "We expect to grow BII's branch network from the current 250 branches to something more sizeable," he said.
  
  Media reports last weekend quoted him as saying that he expected to increase the number of branches to as many as 450 in the next three years.