Malaysia is also showing an unexpected side, as new Prime Minister Abdullah Badawi takes over from the larger-than-life Mahathir Mohamad, cancelling some of the mega-projects beloved of his predecessor, acknowledging corruption and making some surprising appointments in terms of “clean” office holders.
“I don’t think Malaysia has reached the levels of corruption that are, to an extent, irreversible in some countries. I think because of that, it is very important to send the message across that it is still not too late. It is the first step to get the signal out there that he [Mr Badawi] is not tolerating it,” says 53-year old Mr Aziz in the clipped tones that betray his English-speaking education in Malaysia.
Political maturity
Although he does not expect major policy changes in terms of the government’s pro-business attitude, the trained auditor and father of two does acknowledge a new-found maturity in politics. “Clearly, in Malaysia we went through a financial crisis, we went through many political crises in respect of personalities, even perhaps many years ago a constitutional crisis. Malaysians are [now] able to decide on the political future [through elections] every four to five years quite conclusively,” says the unpredictably jolly Mr Aziz in Maybank’s modern Kuala Lumpur headquarters.
As for whether the bumiputra policy of favouring Malays, which is partly responsible for some of the crony capitalism, will be withdrawn, the banker is less sure. “That is a very political question,” he says, before wading in. “At this stage, with the general election [coming up], the government will take the view that it will still like to keep that policy. But if you ask me, in terms of the capabilities of the Malays competing in the Malaysian market, at least we can do that. We are mature enough, we are trained enough, we have gone through over 30 years of trying to equip ourselves to meet the competition and toughness of the business world. From my layman’s perspective, I believe you get more efficient if you are competing in the market in an open manner. But, as I mentioned, it is political.”
General elections are expected in the first half of 2004. They are not expected to upset the economy, which is due to grow at up to 5.5% in 2004. The Asian crisis is long gone.
Heavy responsibility
However, memories of the crisis still have the power to upset the protagonists. “I don’t want to talk about it,” says Mr Aziz with emotion. “I tell you, [it was] difficult! Always a sleepless night, you wouldn’t know where the dollar would be against the ringitt and the impact on the customers we had and consequently the non-performing loans (NPLs). We are glad the whole thing is over. Especially for me, running the biggest bank in Malaysia. As you saw, one by one the banks got into trouble. I mean, if the trouble hit Maybank, it hit the entire economy. It was something I could not control.”
What he has been able to control in his 27 years at the bank is its consistent growth in profits. In the last full year to June 30, 2003 the group posted an 11.3% rise in pre-tax profit to RM2.619bn, with roughly two thirds of that coming from commercial banking, a quarter from the finance company and the rest from investment banking and insurance. Islamic products accounted for more than 6% of pre-tax profits, an area on which the bank and the country have been focusing.
Even though almost one in four Malaysians bank with Maybank, Mr Aziz wants to increase the bank’s market share. There are two ways in which this may happen. First, a law that is due to be enacted soon will remove the distinction between the different sorts of financial institutions. As soon as that happens, Maybank can merge its finance, investment banking and commercial banking arms. It expects the new entity to be operational by October and believes this will help its cross-selling ratio – 2.4 products per client – as well as cutting costs, giving better service to existing customers and attracting new ones.
Second, Maybank could buy another bank. “We are always on the lookout for any proposition that makes sense to us,” says Mr Aziz, using a classic CEO phrase. The central bank is not pushing for more mergers as it did a few years back, he says; instead, it says the market will decide. Expectations are that Malaysia will end up with three strong local banks ready to take on the foreign ones in 2007, when the market is fully opened up, allowing the latter to buy local banks (see News, page 12).
Foreign banks like HSBC and Standard Chartered have a market share of almost 30%, partly dispelling the myth that the government does not welcome foreign capital. In both Thailand and South Korea, foreign banks have less than 5% market share, says Mr Aziz.
Although he believes many local banks are ready for the competition, some of his peers disagree. “If Citi [group] or HSBC are allowed more branches then [they would be] a big threat to Maybank,” says the CEO of a financial group.
Competitive pressure
The banking environment is already very competitive. The largest bank in Malaysia in terms of Tier 1 capital and assets and 123rd in the world in terms of Tier 1 capital, Maybank has been facing falling margins. Its net interest margins are 2.5% and still under pressure. This has led to emphasis on costs, although Mr Aziz says its (admirable) 38% cost/income ratio is as low as the bank wants to go. Below that could mean under-investment, he says.
Maybank has also been emphasising commission income by transforming the branch network into a sales network. “I have close to 700 salespeople out there who are focusing on non-loan products,” says Mr Aziz. Non-interest income contributes about 27% of total income and the goal is to raise that to 35% in the next couple of years. This year, the bank expects wealth management for middle income groups to see the most growth, along with services for small and medium-sized enterprises.
Meanwhile, NPLs, which were a problem in the late 1990s due to the crisis and the lag in recovery, have been improving and now stand at a net 5% of assets. This is proof that the government has not unduly influenced the bank’s lending policies, despite owning 51% of the bank indirectly and 5% directly.
Maybank’s weakness is its investment arm, Aseambankers, which has failed to capitalise on its parent’s strengths: it is only number two or three in the market. This may improve once the group merger goes through, however.
Foreign ambitions
Maybank’s foreign ambitions are not clear. So far, its only significant overseas presence is in neighbouring Singapore (responsible for less than 4% of pre-tax profit), although it has operations in Vietnam, Brunei, China, Hong Kong, Indonesia, Cambodia, the Philippines and Papua New Guinea.
“We are looking at east Asia. We are there in many locations. Of course, we are not in Thailand mainly because we missed the opportunity but, again, [this is] something we continue to look at,” says Mr Aziz.
A peer says of him: “He is well-respected but you never bump into him on a golf course.” Surely, in golf-loving Asia, he is missing out on business contacts?
“They can see me at 8 o’clock in the morning here and leaving at 8 o’clock at night,” laughs Mr Aziz. “I used to play a lot of golf so I got all the contacts I need today.
“It is a bit difficult telling them to come and run,” he adds. He runs on his office treadmill for 40 minutes a day either at lunch or dinner time, and often uses this time to discuss issues with his staff.
However, another form of exercise might be more appropriate, say salsa or merengue dance lessons, in view of his planned third trip to Cuba in the autumn of 2004 and his comment about the music: “Everywhere you go, music. Cubans are attuned to music. You go to the nightclubs, all the time, it is very electrifying. With the music they have you can’t sit around without tapping your feet.”
“We’ve gone off the subject,” I say.
“Oh, I get all excited when we talk about Cuba,” he says, sighing happily.
