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Asia-PacificMay 2 2017

CEO fine-tunes Maybank's business at home and abroad

Maybank’s president and CEO, Abdul Farid Alias, tells Stefania Palma how the lender is refining asset and liability management in its home market of Malaysia while growing in south-east Asian markets such as Indonesia.
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Abdul Farid Alias

In a banking sector that is lagging behind other Association of South-east Asian Nations markets in Tier 1 capital, asset and pre-tax profits growth, Malaysia’s Maybank remains one of the strongest lenders in the country. According to Abdul Farid Alias, bank president and CEO, stronger discipline in asset and liability management as well as strengthening regional subsidiaries, such as that in Indonesia, have contributed to this performance.

In 2016, Maybank’s net interest income grew 5.2% year on year to RM15,301bn ($3464bn) despite a slowdown in loans growth. Reducing costs of funding, pricing credit better and maximising income in client relationships all helped the bank achieve this result, says Mr Alias.

Consumer lending, especially mortgages and auto financing, accelerated in 2016, but wholesale lending either decelerated or even contracted in the first half of the year, he adds. “We wanted to price credit correctly and focus on risk-based pricing. Due to competition, credit may have been underpriced [in the market],” says Mr Alias.

Maybank also applied this risk-based approach to the liabilities side of the business. “There has been huge growth in our current and savings accounts, but you barely see any growth on fixed deposits. We are pushing the agenda on CASA [the ratio of deposits in current and saving accounts to total deposits] quite strongly,” says Mr Alias.

Controlled mortgage lending

A controlled approach to Maybank’s mortgages business has also helped the bank sustain its strong performance. Some analysts argue household lending growth in Malaysia has been alarmingly rapid in the past few years. Today, household loans account for 57% of total banking system loans in the country.

But Mr Alias is unconcerned. Maybank’s year-on-year mortgage lending growth is slowing down, from more than 11% in 2015 to slightly below 9% in 2016. In addition, the real estate sector is still growing, albeit at a slower pace, especially in residential property, he says.

The central bank, Bank Negara Malaysia, has introduced new measures to cool the household market, including limiting mortgage volumes for properties that are not first homes and introducing debt servicing ratio requirements. Now banks need to assess a customer’s capacity to service mortgage repayments against all of their existing obligations.

These new policies have slowed Malaysian household loan growth and property development but, according to Mr Alias, affordable housing is a segment that still has much potential.

More than 1 million people have registered to have a home with state housing development programme PR1MA. But PR1MA has the capacity to deliver only a few thousand houses a year. “That is why everyone in the market is moving away from high-end developments and into affordable housing, which is underserved,” says Mr Alias.

The Malaysian banking sector is keen to jump on the affordable housing bandwagon. “We are one of the banks talking to PR1MA, the government and the Employees' Provident Fund [the national pension fund] to set up a financing scheme to cater to this segment of the population whose monthly household income is below RM10,000. We need to make sure we ringfence everything and make financing easier for these customers,” says Mr Alias.

Beyond local borders

Beyond Malaysia’s borders, Maybank Indonesia is performing particularly well. In 2016, it registered its highest ever profit after tax at Rp1900bn ($145m), a 71% increase from 2015. Mr Alias points to adjusting the balance sheet as a cause of this success.

Maybank Indonesia rebalanced its corporate portfolio in response to the commodity price collapse that started in 2015. “We needed to have a bigger percentage of lower risk, state-owned enterprise borrowers,” says Mr Alias. If corporates accounted for one-third of Maybank Indonesia’s portfolio before the commodity price crash, they now take up less than 20% of the portfolio.

The consumer business is making up for the reduction in corporate lending. “The consumer side is growing too, but it took longer to establish this franchise,” says Mr Alias. Maybank Indonesia had to rebuild its consumer business after Bank Internasional Indonesia, which was acquired by Maybank in 2008, lost the franchise following the global financial crisis of 2007.

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