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Dear Shareholders,
We delivered another record profit in FY2011 and exceeded our headline key performance indicators by healthy margins. This robust performance comes just a year after we reframed our strategic objectives in July 2010 by adopting a new organisation structure we called the new House of Maybank.
Group transformation initiatives achieved growth across all our key business areas, with loans growing at the fastest pace in a decade, driven by a greater contribution from Singapore and Indonesia. Together with our acquisition of Kim Eng Holdings, this is a testament to our success in expanding our regional contribution.
On the back of sustained economic growth in Malaysia and the region, FY2011 was another outstanding year. Profit after tax and minority interest (PATAMI) rose 16.6% to RM4.45 billion from RM3.82 billion the year before.
Group revenue advanced 8.9% to RM13.42 billion from RM12.32 billion with all key business segments posting higher revenue spurred by strong loans and non-interest income growth. Gross loans grew 21.7% supported by strong overseas loans growth of 29.4%, with both Singapore and Bank Internasional Indonesia (BII) recording 25.8%. Meanwhile, domestic loans growth of 16.8% was well above the industry average of 13.5%.
Net interest income rose 6.1% from RM6.77 billion to RM7.19 billion due to strong loans growth by Malaysia and BII, but was offset by lower margins as a result of intense competition.
Our three home markets of Malaysia, Singapore and Indonesia all posted strong results. In Malaysia, profit before tax improved from RM4.12 billion to RM4.75 billion; in Singapore from SGD338.0 million to SGD375.1 million; and in Indonesia from Rp607 billion to Rp782 billion.
Islamic Banking income rose 8.9% with strong financing growth of 35.1%. Islamic Banking now accounts for 27.4% of Group loans from 24.0% a year ago, while net income from insurance business recorded 31.2% growth owing to a higher transfer of actuarial surplus to insurance business income from both conventional insurance and takaful.
Non-interest income was up 11.4% to RM4.12 billion thanks to higher fee income including brokerage fees and the profit from sales of equity and debt securities in a buoyant market.
Overhead expenses rose 14.2% to RM6.65 billion, lower than the previous year’s growth of 15.3%. Growth in expenses was largely the result of higher personnel costs on account of recruitment and performance-based incentives, which are investments in human capital that we are confident will translate into higher productivity and profitability.
At RM502.2 million, allowance for losses on loans was 59.0% lower than a year ago due to higher bad debt recovery and lower collective assessment.
With this financial performance, we surpassed our two headline key performance indicators (KPIs) with a return on equity of 15.2% exceeding the target of 14.0%, and a 22.6% growth in loans and debt securities, far ahead of our 12% target. For a detailed explanation of all our KPIs, please refer to page 44.
Last year I mentioned that in July 2010 we reorganised our operations into three business pillars called the new House of Maybank. In line with this, we embedded our business initiatives – which had earlier been driven by the Transformation Office – into three sectors to enable a more coordinated and effective business execution. I am glad to say this sector-driven agenda has been embraced by the whole organisation and the initiatives are achieving fantastic results. Getting the sectors to drive change has unleashed the bank’s latent energies and spurred synergies right across the Group. It has also enabled us to home in on humanising financial services and reach out to all the communities we touch through our activities.
The new organisation structure has accelerated the performance of both Community Financial Services (CFS) and Global Wholesale Banking (GWB). CFS is now strengthening our competitive position to make us the undisputed leader in retail financial services. GWB has two goals: to maintain its leadership of Malaysia’s corporate banking sector; and to become a regional wholesale banking powerhouse by 2015. Meanwhile, Etiqa, our Insurance and Takaful arm, is achieving sustainable and profitable growth and beefing up its leadership of the industry.
Watching our transformation, I am greatly encouraged by the tremendous response to the President’s Innovative Idea Awards. Many of the more than 500 ideas contributed by staff from all divisions are already being implemented to enhance our customer service, products, processes and marketing. This is a real tribute to the creativity and enthusiasm of our people.
I am seeing a remarkable collaboration between sectors, maximising resources to deliver exceptional customer value, service and support. I am also seeing Maybankers initiating and leading change efforts and taking team responsibility for delivering results. This is what will keep us ahead of our competitors and enable us to enrich the communities around us.
For more information on our strategy, the House of Maybank and what we have accomplished, please refer to page 38.
Our regional expansion is well on track to deliver a 40% profit contribution to the Group by 2015. A major milestone along the road was the acquisition of Kim Eng, which became a subsidiary in May 2011. Kim Eng, a leading brokerage firm with operations across the region, is a platform for us to build our regional investment banking presence in order to become a leading wholesale bank in ASEAN.
To achieve seamless delivery of our services internationally we launched global initiatives to integrate our systems and processes. We have regionalised various services such as internet banking and global ATM installation. We put in place regional transaction banking capabilities encompassing global cash management, trade finance and treasury services. And we strengthened our regional governance and enhanced the calibre of our human capital.
In Singapore, we are growing our SME segment and expanding our structured trade business. Besides this, we are focusing on boosting our income from wealth management and have just kick-started a regional wealth management programme.
In Indonesia, our goal is for BII to become an innovative relationship bank for businesses and communities. Last year, we opened 70 new branches and we will be expanding the network to 450 by the end of 2012. We continue to collaborate with BII on business initiatives and support functions to increase its contribution to Group earnings.
As part of our drive to expand across Asia, our Malaysian, Singaporean and Indonesian operations have been working closely together to develop products that can be replicated regionwide. This teamwork has already achieved results in the areas of credit card, wealth management and remittances.
We are bullish about prospects in the Philippines, where we are providing increased capital to fuel growth, especially in the corporate, commercial and consumer segments. In Cambodia, we opened three new branches in FY2011 and plan to open a further two by the end of this year. We also aim to achieve local incorporation as soon as possible. In the longer term we plan to develop a presence in Thailand, India and the Middle East as well.
Our overseas associates MCB Bank (Pakistan’s most profitable bank) and An Binh Bank (a fast-growing Vietnamese commercial joint-stock bank) again generated positive returns despite difficult macro- economic conditions. Our partnership with MCB involves strategic tie-ups in the areas of trade financing, remittances and Islamic banking. Meanwhile, with ABB – which further expanded its branch network during the year – we are pursuing synergistic growth by enhancing ABB’s trade financing capabilities.
In China, we will be converting our representative office in Beijing into a fully-fledged commercial banking branch by the end of 2011 or early 2012.
As part of our strategy to be ASEAN’s leading Islamic bank by 2015, we introduced our Islamic First strategy last year and I am glad to report we have been successful in growing our Islamic assets at double the rate of conventional assets in Malaysia. By cross-selling and bundling products and services in collaboration with CFS and GWB, we have grown our Islamic financing to 27% of domestic loans, well on the way to account for a third of the Group’s domestic financing portfolio by 2015.
Islamic banking is now being developed with a global approach. We are pursuing growth in Indonesia, the country with the world’s biggest Muslim population, through our conversion of PT Bank Maybank Indocorp into an Islamic Bank, renamed PT Bank Maybank Syariah Indonesia. We are also leveraging on our relationship with our associate company, MCB, to develop Islamic banking business in Pakistan.
Humanising financial services across Asia means that customer welfare comes first. Our commitment to humanising our services is based on three key principles: providing people with access to funding; offering fair terms and pricing; and advising customers based on their needs.
To achieve these ends we have the most extensive financial network in Malaysia, with 386 branches and 4,596 self-service terminals. In remote rural areas we provide mobile bus banking, and in 18 rural areas we are the only bank there is. We also have the nation’s biggest internet banking presence, with a 55% market share. Meanwhile, our Islamic First policy
is proving to be an appropriate and effective driver behind our commitment to fairness.
To ensure our customers enjoy consistent and exemplary service wherever we operate, we have centralised our service units under a new service quality department with a remit to catalyse service transformation and coordinate and streamline customer service initiatives Groupwide.
Humanising our services also means being at the heart of the community. It means being a responsible corporate citizen committed to building a sustainable future for the ASEAN region through long-term social and economic development. It means enriching the lives of the communities we serve and advocating a greener earth.
As an example of how this works in practice, we have now installed user-friendly facilities for physically-challenged customers at many of our branches. Then, on 20 November last year, we held a Maybank Global CSR Day that saw Maybankers participate in group-wide volunteerism.
With the newly set-up Maybank Foundation, we will be able to execute our corporate responsibility (CR) role by engaging with communities across Asia to develop sustainable solutions. In so doing, our intention is that the foundation will offer hope, meet needs, inspire lives, and support aspiration.
Humanising our services begins at home. In FY2011 we continued to focus on communicating our vision, mission and strategies to our staff, so as to achieve a real cultural transformation fuelled by our shared TIGER values of Teamwork, Integrity, Growth, Excellence & Efficiency and Relationship Building.
Maybank is a great place to work. Many initiatives have been launched to nurture talent, to boost efficiency, effectiveness, productivity and innovation, and to inculcate the spirit of service. All these initiatives are based on the recognition that each of our employees is an important asset with a part to play in our long- term sustainable future. We hire the best people for the job and strive to retain, motivate, empower and reward them for their contribution. In this way, and through our shared, humanising spirit, I believe our people find meaning in their work and will strive to serve from the heart.
Our mission to humanise financial services by transforming our business is supported by Enterprise Transformation Services (ETS), which is currently spearheading two vital initiatives involving service quality and information technology.
In FY2010, we embarked on a three-year sustainable service programme. In year one, we focused on developing our service culture and improving governance and process enablement. In years two and three, we will continue to invigorate our processes and systems, always moving in the direction of more humanised banking.
Meanwhile, in July 2010 we launched a five-year IT Transformation Programme (ITTP) encompassing system, process and control changes, and designed to give us an edge over our competitors. We have completed system evaluation and implementation is ongoing.
Several key management changes were made during the year to strengthen our leadership. At the Group Executive Committee level we appointed Muzaffar Hisham as Chief Executive Officer of Maybank Islamic Berhad and Head of Group Islamic Banking; Hans De Cuyper as Head, Etiqa Insurance & Takaful and Chief Executive Officer of Mayban Ageas Holdings Berhad; and Dr. John Lee Hin Hock as Group Chief Risk Officer. Other senior management positions were filled by the appointment of Eliza Mohamed as Head of Corporate Affairs and Mohamed Adam Wee Abdullah as Chief Marketing Officer.
In FY2011, we embarked on a project to refresh the Maybank brand. This involves reviewing our Group corporate architecture and identity to better align our brand strategy with our business vision. The project will enable us to leverage more effectively on Maybank’s brand equity through a more consistent interpretation and communication of our brand proposition to all stakeholders across Asia. It will also allow us to maintain and celebrate our brand heritage and at the same time rejuvenate the brand so as to boost its relevance and appeal to both existing and new customers. We are pleased to introduce the new Maybank logo as part of enhancing our brand, which will become an ever more valuable asset and a key tool in building enduring customer relationships.
Efficient capital management is a priority in anticipation of the more stringent capital requirements of Basel III. As part of our ongoing capital optimisation initiatives, we raised capital equivalent to more than RM6 billion through capital raising exercises and through our dividend reinvestment plans for the last two dividend payments. We maintained healthy capital levels after the acquisition of Kim Eng with our core capital ratio and risk weighted capital ratio at 11.84% and 15.36% respectively as at 30 June 2011.
Economic prospects for Malaysia and the ASEAN region remain positive, supported by resilient domestic demand, despite uncertainties and challenges in the US, the Eurozone and Japan.
We expect the Malaysian economy to record GDP growth of 5.1% in 2011 and 5.5% in 2012. Singapore’s GDP growth is forecast at 5.2% in 2011 and 4.4% in 2012, while growth in Indonesia is expected to be 6.2% in 2011 and 6.5% in 2012.
As a result, we anticipate loans growth in our three home markets to remain strong. Robust expansion in the corporate segment should offset the more moderate pace of consumer demand due to rising inflation and regulatory measures to rein in household debt levels. In Malaysia, the gradual rollout of projects as part of the Government’s Economic Transformation Programme will support corporate loans growth and capital market activities. Loans growth in Indonesia is expected to be the strongest in the Group, while in Singapore we anticipate further broad-based but moderate growth. We expect credit costs to rise with loans growth and stabilisation of FRS 139.
Competition will remain intense, partly due to industry liberalisation and the consolidation of the domestic banking industry in the light of the imminent introduction of the second Financial Sector Masterplan. As a result, net interest margins could still be under pressure as competition for loans and deposits becomes more challenging.
We will continue to expand non-interest income through growth in our insurance and investment banking business, which will leverage on the regional investment banking platform of Kim Eng and the expertise of Maybank-IB to boost the Group’s fee-based income.
Overall, we are confident of recording a still better financial performance for the current financial year which will be
six months ending 31 December 2011 as we change to a December financial year end. Our headline KPIs for the period are a return on equity of 16% and loans and debt securities growth of 12%. Other KPIs are listed in the table above.
Everything we are today, everything we stand for, and everything we achieved last year is a tribute to the commitment of our stakeholders. We are profoundly grateful for the dedication of all our Group staff and the loyalty of our customers, the trust of our partners and associates, and the support of Bank Negara Malaysia, the Securities Commission and the
other regulatory authorities that have guided us over the years.
On a personal note, my heartfelt thanks to our Chairman and Board members for their support and guidance and for entrusting me to continue to lead the Maybank Group. Likewise, my thanks also to my fellow management colleagues for their support and commitment in steering the Group forward.
Meanwhile, buoyed by the outstanding results achieved in FY2011 and strengthened by the backing of our stakeholders, our transformation will continue as we journey to become a regional financial services leader by humanising financial services across Asia.
DATO’ SRI ABDUL WAHID OMAR
President & CEO
