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Analyst Presentation27 February 2009
2
Disclaimer
This presentation has been prepared by Malayan Banking Berhad (the “Company”) solely for use during its presentation to prospective investors held in connection with the proposed renounceable underwritten rights issue of new ordinary shares in the capital of the Company (the “Rights Shares”). By viewing all or part of this presentation, you agree to maintain confidentiality regarding the information disclosed in this presentation as set out in the confidentiality agreement signed by you. Any failure to comply with these restrictions may constitute a violation of applicable securities laws.
This presentation is for information purposes only and does not constitute or form part of an offer, solicitation or invitation of any offer, to buy or subscribe for any securities, nor should it or any part of it form the basis of, or be relied in any connection with, any contract, investment decision or commitment whatsoever.
It is not the Company’s intention to provide, and you may not rely on this presentation as providing, a complete or comprehensive analysis of the Company’s financial or trading position or prospects. The information in this presentation has not been independently verified and is subject to verification, completion and change without notice. The information and opinions in this presentation are provided as at the date of this presentation and none of the Company, Maybank Investment Bank Berhad (the “Principal Adviser”), Credit Suisse Securities (Malaysia) Sdn Bhd and Goldman Sachs (Singapore) Pte (collectively referred to as the “International Advisers”) or any of their respective affiliates, advisers or representatives, is under any obligation to update or keep current the information contained herein. Accordingly, no representation or warranty, express or implied, is made or given by or on behalf of the Company, the Principal Adviser and the International Advisers or any of their respective affiliates, advisers or representatives, as to and no reliance may be placed for any purposes whatsoever on the accuracy, completeness or fairness of the information or opinions contained in this presentation. None of the Company, the Principal Adviser and International Advisers or any of their respective affiliates, advisers or representatives accepts any liability whatsoever for any loss howsoever arising from any use of this presentation or their contents or otherwise arising in connection therewith.
This presentation may contain forward-looking statements that involve risks, uncertainties and other factors. Actual results, performance or achievements of the Company may be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Company’s present and future business strategies and the environment in which the Company will operate in the future, and must be read together with such assumptions. Predictions, projections or forecasts of the economy or economic trends of the markets are not necessarily indicative of the future or likely performance of the Company. Past performance is not necessarily indicative of future performance. The forecast financial performance of the Company is not guaranteed. You are cautioned not to place undue reliance on these forward-looking statements, which are based on the current views of the Company on future events.
Any decision to subscribe for or purchase any shares in the offering should be made solely on the basis of the information contained in the abridged prospectus relating to the Rights Shares after seeking appropriate professional advice, and no reliance should be placed on any information other than that contained in the abridged prospectus.
Neither this presentation nor any copy or portion of it may be distributed, reproduced, sent or taken or transmitted, directly or indirectly into the United States, Canada or Japan or anywhere else. The Rights Shares have not been, and will not be, registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”), or the securities laws of any state of the U.S. or other jurisdiction and the Rights Shares may not be offered or sold within the U.S. except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state or local securities laws. This presentation is not an offer for sale of securities in the United States. The Company does not intend to offer or sell the Rights Shares in the United States.
The issuance and listing of the Rights Shares is subject, amongst others, to the approval of the Securities Commission of Malaysia, Bank Negara Malaysia, Bursa Malaysia Securities Berhad and the shareholders of the Company.
This presentation may not be forwarded or distributed to any other person and may not be copied or reproduced in any manner whatsoever. Failure to comply with this directive may result in a violation of applicable laws of other jurisdictions.
3
Agenda
Financial Results
Strategic Transformation Plan
Questions & Answer Session
4
1H09 Highlights
Completed tender offer for BII in December 2008 and thereby concluded the acquisition with a 97.5% shareholding.
Maybank was awarded Malaysia’s Most Valuable Brand for second consecutive year, valued at RM9.347 billion.
Rebranding of Aseambankers to Maybank Investment Bank.
FinancialPerformance
1H09 Net Income rose 6.5% contributed by 37.7% growth in Islamic Banking Income and 3.2% growth in Net Interest Income. Net Interest Margin improved by 21 bps to 2.71% in 2Q09. Net Profit attributable to shareholders for 2Q09 of RM734.6 mil was 28% higher QoQ. However, Net Profit for 1H09 fell 11% YoY to RM1.306 billion. BII’s Net Profit for 2008 rose 36% YoY with 4Q08 net profit rising 16% QoQGroup annualised Net ROE stands at 13.2% for 1H09.
BusinessPerformance
Corporate Update
Core commercial banking franchise remains strong. However, performance of International Banking, Investment Banking and Insurance businesses were affected by weakening economic conditions.Transactional income from customer franchise for 1H09 grew 11.2% YoY. Group loans and advances grew by 21.2% on annualised basis. Domestic loans and advances grew by 6.3%. Net NPL improved to 1.80% from 1.84% in preceding quarter and 2.69% a year ago. Customer deposits and domestic deposits grew 20.8% and 9.0% respectively.
5
Net Interest Income 1,547.4 1,265.0 22.3% 1,414.7 9.4% 2,812.4 2,726.2 3.2%Islamic Banking Income 301.7 282.0 7.0% 214.2 40.9% 583.6 423.7 37.7%Non Interest Income 809.6 478.7 69.1% 636.3 27.2% 1,288.4 1,246.6 3.4%Net Income 2,658.7 2,025.7 31.2% 2,265.2 17.4% 4,684.5 4,396.5 6.5%
Overhead Expenses (1,408.5) (1,216.4) 15.8% (1,054.0) 33.6% (2,625.0) (2,063.0) 27.2% Overhead Expenses (1,335.2) (1,121.2) 19.1% (984.0) 35.7% (2,456.4) (1,930.8) 27.2% Claims Incurred (73.3) (95.2) -23.0% (70.0) 4.7% (168.5) (132.2) 27.5%Operating Profit 1,250.2 809.3 54.5% 1,211.2 3.2% 2,059.5 2,333.5 -11.7%
● Loan Loss Provision (312.2) (192.2) 62.4% (177.6) 75.8% (504.4) (285.6) 76.6% Net Specific Provision (406.7) (152.7) 166.3% (125.9) 223.0% (559.4) (252.1) 121.9% General Provision 94.6 (39.5) -339.5% (51.7) -283.0% 55.1 (33.5) -264.5%
● Write-back of allowance for non-refundable deposit
- 483.8 - - - 483.8 - -
● Profit/(Loss) from associate 22.3 22.9 -2.5% (0.4) n.m. 45.1 (0.5) n.m.● Impairment loss in an
associate- (242.0) - - - (242.0) - -
Profit before tax 960.3 881.8 8.9% 1,033.2 -7.1% 1,842.1 2,047.3 -10.0%Tax (225.6) (311.0) -27.5% (307.0) (536.6) (569.2) -5.7%Minority Interest (0.1) 1.4 -107.6% 4.8 -102.3% 1.3 (11.8) -111.1%Profit after Tax and MI 734.6 572.2 28.4% 731.0 0.5% 1,306.7 1,466.4 -10.9%
EPS (sen) 15.05 11.72 28.4% 15.01 0.3% 26.77 30.13 -11.2%
YoYchange
%
Quarter
-26.5%
Half Year
1H08 1Q09YoY
change%
QoQ change
%2Q08 1H09
RM million2Q09
1H09 Group Income Statement
6
1,415 1,350 1,351 1,2651,547
2,726 2,812
636 6341,165
479
810
1,247 1,288
268
273
282
302
424584
214
-
1,000
2,000
3,000
4,000
5,000
2Q08 3Q08 4Q08 1Q09 2Q09 1H 08 1H 09
Net interest income Non-interest income Islamic Banking income
Net Income growth
RM million
4,396
4,684
2,265 2,252
2,789
+6.5% YoY
+37.7%
1H09 Net Income grew by 6.5% YoY.
Net Interest Income grew 3.2% YoY due to growth in loans.
Non-Interest Income recorded a growth of 3.4% YoY. Transactional fee income grew by 11.2% but was partially offset by decline in investment and trading income.
Income from Islamic Banking operations grew by 37.7%YoY driven by strong demand for Islamic auto financing and securities financing as well as higher income from investment and deposits.
2,026
2,659
+3.4%
+3.2%
+17.4% YoY
+31.2% QoQ
7
Revenue by Segment
RM million 1H09 1H08 YoY change
Contribution (%)
Consumer Banking 2,003.3 1,986.9 0.8% 40%Business Banking 1,035.7 1,037.4 -0.2% 21%Corporate Banking 350.8 180.0 94.9% 7%Investment Bkg and Treasury 389.4 360.4 8.0% 8%International 943.9 698.1 35.2% 19%Insurance & Takaful 348.0 333.1 4.5% 7%Management/Corp Support (83.2) (21.8) 281.7% -2%
4,987.9 4,574.1 9.0% 100.0%-
Unrealised loss on derivatives (109.9) (177.6) -38.1%
Reversal of revaluation gain on SGD position
(193.4) -
Total Revenue (Net Income) 4,684.6 4,396.5 6.5%
Revenue
Core commercial banking franchise remains strong. However, performance of International Banking, Investment Banking and Insurance businesses were affected by weakening economic conditions.Although 1H09 revenue for these three businesses recorded growth, profit before tax for International Banking and Investment Banking both declined 48% while Insurance business fell 74%.Commercial banking contributed to 93% of Total Revenue. By geography, domestic business contributed to 81% of Revenue whilst International Business contributed 19% of Revenue.
8
Net Interest Margin
* NIM excluding BII = 2.55%
6.50
6.24
5.81 5.665.62
2.602.74
2.68
2.58
2.75
3.653.75
3.07 2.98 3.04
2.71 *
2.73
2.72 2.81
2.50
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
2Q 08 3Q 08 4Q 08 1Q 09 2Q 09
%
Loans Interest Yield
Customer Deposit COF
Gross Lending Spread
Net Interest Margin of Int. Bearing Assets
Net Interest Margin, Loans Interest Yieldand Customer Deposit COF
NIM on interest earning assets improved to 2.71% in 2Q09 due to larger reduction in cost of funds of customer deposits relative to lending yield.
In addition, spreads on government securities have widened considerably.
Lending spread have stabilised in last 3 quarters.
9
2Q09Dec 08
1Q09Sep 08
QoQ % Change
2Q08Dec 07
YoY % Change
1H09Dec 08
1H08Dec 07
Transactional Income (Customer franchise)Commission, service charges and fees 390.9 397.6 -1.7% 375.7 4.0% 788.5 707.6 Other fee income 69.1 62.7 10.1% 72.5 -4.8% 131.8 140.8 Foreign exchange profit/(loss) 214.3 68.2 214.3% 91.8 133.6% 282.5 215.0 Net premiums written 128.8 122.8 4.9% 125.4 2.7% 251.5 244.7 Total Transactional Income 803.1 651.3 23.3% 665.4 20.7% 1,454.4 1,308.1
Investment & TradingGain/loss from disposal of securities 26.2 (0.2) n.m. 9.3 183.3% 26.0 30.4 Gross Dividend from Securities portfolio 6.6 11.7 -44.0% 9.4 -30.3% 18.3 17.5 Write back of /(Provision for) impairment losses in securities, net (22.6) (16.2) 38.9% 7.0 -423.3% (38.8) (10.5)
Total Investment & Trading 10.3 (4.7) -316.1% 25.7 -60.0% 5.5 37.3 Other income 107.3 24.5 338.1% 35.9 199.4% 131.8 78.7 Unrealised gain/(loss) on revaluation of securities held-for-trading and derivatives (111.1) 1.1 n.m. (90.6) 22.6% (109.9) (177.6)
Reversal of forex of gain relating to BII - (193.4) - - - (193.4) -
Total non-interest income 809.6 478.7 69.1% 636.3 27.2% 1,288.4 1,246.6
Quarter Half Year
RM million
Group Non-Interest Income
Transactional income from customer franchise for 1H09 grew 11.2% YoY.
10
Group Overhead Expenses
469.7 559.8 631.1
913.7
1190.950.4
64.482.7
106.2
147.1
89.4106.2
115.8
183.7
222.0
110.4112.9
113.8
212.1
226.7
115.2136.5
231.9
229.9
368.2
114.5
116.0
115.3
219.0
231.3
70.0
95.2
73.3
132.2
168.5
70.2
66.2
44.625.6
34.4
0
500
1000
1500
2000
2500
2Q08 1Q09 2Q09 1H08 1H09
RM
milli
on
33.6% YoY
15.8% QoQ
1,054.0
1,216.6
1,408.5
2,063.0
2,624.9
27.2% YoY
Inc. BII Excl. BII
Claims incurred 27.5% 27.5%
Fees & Brokerage 5.6% 5.6%
Admin & General 60.2% 16.8%
Marketing 6.9% 1.4%
Depre. & Amort. 6.0% -18.9%
IT 20.8% 19.7%
Establishment 38.5% 17.6%
Personnel * 30.3% 20.8%
Total 27.2% 15.6%
YoY Change
* Growth in personnel cost excluding BII as well as salary revision and collective agreement would be 12.1%
Overhead Expenses for 1H09 rose 27.2% YoY but excluding BII overheads grew 15.6%
11
RM billion Dec 08 Jun 08
Cash and short-term funds 22.73 27.64 -35.5%Deposits and placement with FI 4.15 8.96 -107.4%Securities Portfolio 52.06 36.55 84.9%Loans, advances and financing 182.58 164.80 21.6%Insurance & Takaful Business 16.10 15.69 5.2%Other Assets 24.09 15.46 111.6%Total Assets 301.71 269.10 24.2%
Deposits from customers 206.59 187.11 20.8%Deposits and placements of banks and FI 29.15 24.55 37.5%Obligations on securities sold under Repo - 0.32 n.m.Bills and acceptances payable 3.71 4.79 -45.0%Subordinated debts & Capital Securities 14.65 8.47 145.8%Insurance & Takaful liabilities & policy holders' funds 16.10 15.69 5.2%Other Liabilities 10.43 8.07 58.6%Total Liabilities 280.63 249.01 25.4%
Shareholders Funds 21.08 20.09 9.8%
Loan-to-Deposit Ratio 88.4% 88.1%
Annualised% Change
Balance Sheet
Total Assets rose 24% on annualised basis due to consolidation of BII.
Growth in assets driven by 22% rise in net loans and 85% increase in securities portfolio.
During 1H09, customer deposits, excluding BII, rose RM5.8bn, or nearly funded all the net loans growth (+RM5.9bn), denoting ample liquidity.
12
Loans Growth
RM billion Dec 08 Dec 07 YoY Growth Jun 08 1H09 growth
(annualised)
Industry growth (YoY)
Domestic 125.9 112.4 12.1% 122.1 6.3% 12.8%
Consumer 59.8 55.7 7.3% 58.0 6.1% 11.1%Securities 10.4 9.9 5.3% 10.3 0.9% 29.6%Vehicles 18.6 14.8 25.9% 17.8 9.1% 8.4%Residential 24.6 24.8 -1.0% 24.3 2.7% 10.2%Credit Card 3.6 3.0 21.0% 3.2 23.4% 9.6%
Business 66.2 56.7 16.8% 64.1 6.5%Corporate 39.4 32.2 22.4% 35.7 20.8%SME 26.8 24.5 9.4% 28.4 -11.4%
Overseas 63.4 42.9 47.7% 49.1 58.3%Excl. BII 51.3 42.9 19.3% 49.1 8.6%
S'pore (SGD b) 16.0 14.0 13.9% 15.3 8.3%BII (Rp trillion) 38.3 32.2 18.9% 35.0 18.6%Others 12.7 10.8 17.6% 12.2 9.7%
Gross Loans 189.4 155.3 21.9% 171.2 21.2%Exc. BII 177.2 155.3 14.1% 171.2 7.0%
Group loans grew 21.2% in 1H09 on annualised basis due to consolidation of BII. Excluding BII, loans grew 7.0%.
Domestic Loans grew 6.3%.
Consumer loans grew 6.1% as growth in mortgages improved while hire purchase began to subside. Credit card continues to show strong growth.
Business loans grew 6.5%, driven by strong Corporate loans growth of 20.8% which offset a 11.4% contraction in SME loans.
Overseas loans grew 58% on annualised basis but excluding BII, growth slowed to 8.6% due to the global economic slowdown with growth for Singapore recording a 8.3% growth.
13
83.6 87.299.2 99.8100.2
2.692.43
1.92 1.84
5.124.80
3.76 3.60 3.59
2.40
6.406.00
4.90
1.80*
2.80
3.003.20
2.40
5.105.30
1
2
3
4
5
6
7
2Q08 3Q08 4Q08 1Q09 2Q09
Net NPL Ratio Gross NPL Ratio
Industry NPL Net NPL Ratio Industry NPL Gross NPL Ratio
Asset Quality
Loan Loss Coverage
Gross & Net NPL Ratio (%), Loan Loss Coverage
100.8Excl. BII
Gross NPL
RM million Dec 07 Jun 08 Sep 08 Dec 08 YoY Growth
Half YearAnnualised
Growth
Domestic 7,506.0 6,066.0 6,128.2 5,900.8 -21.4% -5.4%
Securities 329.4 235.6 239.4 240.8 -26.9% 4.4%
Vehicles 148.4 113.9 138.0 137.1 -7.6% 40.6%
Residential 2,448.2 2,054.3 2,027.8 2,032.2 -17.0% -2.2%
Credit Card 52.0 39.5 40.7 43.1 -17.0% 18.4%
Construction 690.9 413.7 363.3 410.8 -40.5% -1.4%
Working capital 2,673.4 2,583.6 2,729.0 2,442.8 -8.6% -10.9%
Overseas 503.5 406.5 781.0 926.6 84.0% 255.9%
Singapore 366.2 237.8 238.8 302.1 -17.5% 54.1%
Indonesia - - 396.7 384.9 n.m. n.m.
Others 137.3 168.7 145.5 239.6 74.5% 84.0%
Group 8,009.5 6,472.4 6,909.2 6,827.4 -14.8% 11.0%
Group ex. BII 8,009.5 6,472.4 6,512.5 6,442.4 -19.6% -0.9%
• Net NPL ratio as at end-2Q09 further improved by 4 bps to 1.80% although Gross NPLs for international operations have started to rise. Domestic NPLs have stabilised in 2Q09 compared to 1Q09 although there is likelihood of NPLs rising in 2H09.
* Net NPL excluding BII for 2Q09 is 1.78%
14
101.8 103.4 105.7 115.1 116.2
15.3 13.313.9 15.4
29.4 28.4 29.434.0 33.2
36.1 38.1 38.641.9 41.8
15.6
0
50
100
150
200
Dec 07 Mar 08 Jun 08 Sep 08 Dec 08Fixed Deposits Money Mkt & Struc. Deposits
Savings Deposits Demand Deposits
36.3%37.0%36.4%35.9%35.8%
48.0%48.4%48.2%47.4%47.8%
0%
20%
40%
60%
80%
100%
Dec 07 Mar 08 Jun 08 Sep 08 Dec 080%
20%
40%
60%
80%
100%
Savings Deposits Demand Deposits
Money Market & Structured Deposits Fixed Deposits
CASA (Savings and Demand) Deposit from Individuals
RM
bill
ion
206.6182.8
204.6
13.0% YoY
0.8% QoQ
Customer Deposits
Customer depositsComposition of customer deposits
• For 1H09, customer deposits for the Group grew 20.8% on annualised basis due to consolidation of BII (RM13.7b) and growth in Money Market and Structured Deposits.
187.1185.2
20.8% annualised
15
Capital AdequacyThe Core Capital Ratio (CCR) and Risk Weighted Capital Ratio (RWCR) of the Bank, based on credit and market risks now stands at 10.19%The target CCR and RWCR remains at 7-8% and 11-12% respectively.
Capital Adequacy
11.0
9%
10.1
9% 11-1
2%
7-8%8.99
% 12.2
7%
12.3
2%
10.1
9%
0%2%4%6%8%
10%12%14%
Dec
07
Jun
08
Dec
08
Targ
et
Dec
07
Jun
08
Dec
08
Targ
et
Core Capital Ratio RWCR
BANK
9.17
%
10.6
0%
8.13
% 13.3
2%
14.4
9%
13.5
4%
0%
4%
8%
12%
16%
Dec
07
Jun
08
Dec
08
Dec
07
Jun
08
Dec
08
Core Capital RatioRWCR
GROUP
16
Maybank Group: Key Ratios
2Q09Dec 08
1Q09Sep 08
4Q08Jun 08
2Q08Dec 07
1H 09Dec 08
1H 08Dec 07
● Net Interest Margin 2.71% 2.50% 2.81% 2.73% 2.71% 2.66%● Net Return on Equity 14.6% 11.6% 18.7% 15.1% 13.2% 15.2%● Fee to Income Ratio 32.0% 25.2% 41.0% 29.2% 29.1% 29.4%● Adj. Fee to Income Ratio * 34.7% 29.5% 37.5% 31.9% 33.4% 32.4%● Cost to Income 53.0% 60.0% 40.4% 46.5% 56.0% 46.9%● Adj. cost to Income ** 48.2% 52.1% 40.6% 41.8% 49.2% 42.2%● Loan-to-Deposit Ratio 88.4% 90.0% 88.1% 81.4% 88.4% 81.4%
● Asset Quality● Gross NPL Ratio 3.59% 3.60% 3.76% 5.12% 3.59% 5.12%● Net NPL Ratio 1.80% 1.84% 1.92% 2.69% 1.80% 2.69%● Gross Reserve Coverage 99.8% 100.2% 99.2% 83.6% 99.8% 83.6%● SP charge off rate (bps) 75 35 -6 # 33 56 ^ 34
● Capital Adequacy (Bank)● Core Capital Ratio 10.19% 10.76% 11.09% 8.99% 10.19% 8.99%● Risk Weighted Capital Ratio 10.19% 10.76% 12.32% 12.27% 10.19% 12.27%
* excluding unrealised loss on derivatives and one-off items related to BII.** excluding insurance claims (cost) and unrealised loss on derivatives and and one-off items related to BII.
# Before NPL sale = 29bps ̂Excluding BII = 44bps
17
Strategic Transformation Plan
18
Maybank Aspirations
Top 5 in South/Southeast Asia by size AND performance− Size defined by asset and market cap− Performance defined by CIR, ROE, TSR
Undisputed leadership in Malaysia, across all high margin/profitable products/segments
Truly regional organisation, with ~40% of gross loans derived from international operations
Recognised for delivering innovative and superior value proposition to customers
Being among the top-quartile employer oftalent in each of our markets
To be a leading regional financial services group
1
2
3
4
5
By 2015…
19
Three Strategic Thrusts
Key componentsStrategic thrusts• Establish differentiated multi-specialist model and well-executed business
strategies:− #1 in Consumer, SME and Corporate Banking businesses− Top 2, full-fledged Investment Bank (incl. Treasury)− Top 2 position in Insurance, Takaful and Asset Management − #1 in Islamic Banking
Undisputed leadership in Malaysia across all attractive products/segments
1
• Capture full value from our current footprint, managing for above-market growth through market-specific approaches to capture value
• Complement coverage in selected high-growth countries, in particular in China (selected provinces), India and GCC
• Develop and capture emerging regional Islamic banking opportunities:– Near-term: Corporate/IB and Takaful– Mid-term: High-end Consumer/SME Banking
Strengthen regional presence
2
• Assemble/build a leadership pool and pipeline to realise our aspirations• Establish highly effective performance and talent management processes• Create a Group-wide performance culture
Become a talent and execution-focused company
3
20
Leap 30: Two Waves
Wave 1 (Sep 2008 – Dec 2009) Wave 2 (Jan 2010 – Dec 2011)
~ 150 people dedicated to these initiatives over
the next 3 years
• 9 business initiatives
• 5 enabling initiatives
• 6 talent initiatives
• 8 business initiatives
• 1 enabling initiative
• 1 talent initiative
A total of 20 initiatives will be launched in Wave 1
The remaining 10 initiatives will be launched in Wave 2
21
Update on Strategic Transformation Plan
Cost Optimisation
Initiatives
Consumer
Objective Recent Progress
• Launch tactical sales stimulation
• Enhance consumer sales with tangible sales uplift captured in the first year of launch
• Launched pilot at 8 branches.
• IT Projects Reprioritization
• Detailed spend analysis and quick win identification
• Category mapping of group spend• Defining governance model and
structuring central procurement unit
• Capex cost reduction/avoidance of RM60 million in this FY
• Cost reduction/avoidance of RM85 million in this FY
In November 2008, Maybank refocused resources and management attention to realign Strategic Transformation Programme with immediate organisational needs to realise near term revenue impact & cost reduction in challenging economic conditions.
• Reduce procurement costs
• Ensure IT projects resources are focused on delivering benefits
Insurance
• Create a domestic Insurance champion
• New tiered system for agency and full product range,.
• Increase in premiums to Etiqa• Increase commission/fees to
Maybank
Enterprise
• Deepen share of Corporate customers’ wallet
• Enhance customer penetration with improved wallet share
• Intensify Tactical Account Planning for Corporate clients.
22
Update on Strategic Transformation Plan
People
Initiatives
Operation
Objective Recent Progress
• MIS enhancement • Upgrade management information system
• Reprioritise to enhance performance management dashboards
Credit• Credit Collections • Tighten prevention mechanisms in
deteriorating economic conditions• Pilot specific performance
improvement measures targeted at prevention
• Upgrade performance management
• Launch talent management• Enhance leadership
development• Ramp-up external
recruitment engine• Embed core values in the
way we work
• Build a pipeline of talent and leaders to achieve Maybank’saspiration to be a talent and execution –based company;
• And be among the top quartile employer of talent in each of Maybank’s markets.
Critical enabling initiatives are in motion to support mid-long transformation efforts:-
• Group Talent Review Committee and Sectoral Review Committees formed
• Achieved ratio of 1:2 succession plan coverage for Level 1 positions
• Intensive improvement programmefor Performance Management launched
• Centralised Recruitment set up• Annual Talent Management
calendar introduced
23
Maybank – In A Position of Strength
No. 1 Bank in Malaysia in assets and reach
No. 1 Islamic Bank in Malaysia in assets
Leading bank in most business segments
Superior multi-channel distribution network
Comprehensive portfolio of products and services
Proactive and conservative approach to capital management
One of the most recognized brand names
Strong shareholder support and ratings
Strong dividend track record
The Dominant Malaysian bank… … And An Emerging Regional Leader
Diversified Pan-Asia platform
Presence in the highest growth markets
Leadership in fast-growing Islamic banking
Continued momentum and robust performance amidst current environment
Solid financial strength
Aspire to be The Undisputed Malaysian Leader and A Top 5 Bank in South and South East Asia
24
Strategic Transformation Plan
Further strengthen capital base via rights issue⎯ Pre-emptive capital to
strengthen Maybank’scapital base
⎯ Widen Maybank’s competitive positioning
RM6.0 billion rights issue is an integral part of Maybank’s strategy to become one of the top 5 banks in South and South East Asia by size and performance by 2015
Strategic Transformation Plan
1
Putting in place an organisationaland corporate structure that provides greater strategic, financial, and operational flexibility across the group⎯ Adopt a financial holding company
structure, subject to regulatory and tax considerations and a final implementation plan
Strengthening core business and franchise⎯ Achieve globally-benchmarked
operating metrics⎯ Achieve leadership across all key
segments of business⎯ Capture value from
new investments⎯ Improve synergies across the
Maybank Group
2 3
Implementation of LEAP 30 initiatives underway
Rights Issue
25
Comprehensive one-time capital raise to provide sufficient capital to implement the Bank’s key strategic initiatives for the next 2-3 years
Rights Issue to Strengthen Franchise and Accelerate Growth
Domestic Franchise
Focus on organic growth to establish undisputed leadership in Malaysia across all high margin products and segments:⎯ #1 in consumer, SME and corporate banking business⎯ #1 in Islamic banking⎯ Top 2 in investment banking⎯ Top 2 in insurance, Takaful and asset managementContinually strengthen the Bank’s “anytime, anywhere” distribution capability Achieve superior operating metrics through productivity improvements and cost management
Regional FranchiseCompleted major strategic acquisitionsStrong presence in Singapore, Philippines and VietnamStrengthening leadership position in Islamic BankingStrengthening regional presence by capturing value from BII and MCB through participating in the Bank’s management and operations. Recent progress includes:⎯ Strengthening key management positions at BII (CEO, COO, CFO)⎯ Leveraging BII and MCB franchise to develop fee-based business
such as investment banking
1
2
26
Summary of Rights Issue
Offer Type: Renounceable, fully underwritten rights issueSize: Approximately RM6.0 billionNo. of rights shares: Up to 2,197 million rights sharesDiscount: 30% to 40% to the theoretical ex-rights price of the SharesRights Ratio: 9 rights share for 20 existing shares
Substantial Shareholder Commitment⎯ Irrevocable written undertakings to fully subscribe for its pro-rata entitlements by Permodalan
Nasional Berhad and its managed funds (55.7%, plus 20% excess shares commitment)Principal Advisor: Maybank Investment Bank; International Advisors : Goldman Sachs, Credit Suisse
Pro forma consolidated Core Equity1 ratio of up to 8.1% and Tier I ratio of up to 11.0% after the rights issue (vs. consolidated Core Equity1 ratio of 5.2% and Tier I ratio of 8.1%), as at Dec 20082
Support Strategic Transformation PlanEnhance balance sheet and capital ratiosStrengthen franchise and accelerate organic growth
Offer Structure
Issue Managers
Financial Impact
Rationale
(1) Core Equity capital refers to Tier 1 capital less qualifying preferred and hybrid instruments(2) Based on unaudited December 2008 financials
27
Resilient Franchise with Strong Fundamentals
2Q FY09 2Q FY09Pro Forma
Well Capitalised Quality Loan Book Sound Investment Portfolio
Tier I Capital Total Capital
8.13%
11.01%
2Q FY09 2Q FY09Pro Form a
13.54%
16.42%
Capital levels well above minimum regulatory requirements
1 1
Min Reg. Level = 4%
3.78% 3.61% 3.60%
1.80%1.84%1.92%
99.2% 100.2% 99.8%
4Q FY08 1Q FY09 2Q FY09
Gross NPL Net NPLCoverage
Asset quality continues to show improvementLoan coverage of 100% in line with conservative provisioning levels
Government and government-linked securities comprise 55% of Maybank’s investment portfolioSignificant portion of remaining portfolio consists of debt from the largest and most stable corporates in Malaysia
Local corporate debt 22%
Govt. & govt-linked
Securities
55%
Note: 2Q FY09 figures based on unaudited December 2008 financials(1) Pro forma capital ratios based on net proceeds under the minimum scenario and do not take into account impact on RWA from new proceeds
Min Reg. Level = 8%
Total Portfolio = RM52,063 million
Other 23%
28
Strengthening Balance Sheet and Capital Ratios
Recent Fund Raising Exercise Capital Ratio Benchmarking1
Rights IssueUp to RM 6.0 bn
SubdebtRM 3.1 bn
Hybrid Tier I RM 2.5 bn
Non-Innovative Tier I
RM 3.5 bn
RM 9.1 bn already raised
Preemptive capital raising exercise
16.4% 15.5% 15.5%14.2% 13.7%
13.5%11.7%
7.4%10.6%9.3%9.9%
8.1%6.5%
5.2%6.8%
14.8%
14.4%
7.8%8.1%8.3%
9.5%
11.2%11.8%11.0%
Maybank(PF)
DBS UOB OCBC CIMB Public Maybank RHB
Core Tier 1 Capital Tier 1 Capital Total Capital
Maybank’s capital ratios will be best-in-class post rights issue, which strongly positions Maybank to capture market share and business opportunities
2
(1) Based on latest available public data of 3Q08, except for Maybank and Public Bank, which are based on Dec 2008 data. Maybank Dec 2008 financials are unaudited (2) Pro forma capital ratios based on net proceeds under the minimum scenario and do not take into account impact on RWA from new proceeds(3) Core Tier 1 capital refers to Tier 1 capital less qualifying preferred and hybrid instruments
3Jun 2008 Aug 2008 Nov 2008 Mar 2009 Total
Total Capital Raised
RM 15.1 bn
29
Update on Bank Internasional Indonesia (“BII”), MCB Bank Ltd (“MCB”) and An Binh Bank (“An Binh”)
Maybank remains proactive in conducting an impairment review with regard to its recent acquisitionsThe significant deterioration in the share price of BII and MCB and the current difficult economic environment globally, including in the countries where these investments are, have given an indication of impairment in these investments. Accordingly we have undertaken the process of determining the recoverable amount based on FRS136 requirements. Maybank is committed to completing this process by our fiscal-year end (June 2009) and subsequently determining any potential impairment charge relating to the acquisition in accordance with FRS 136: Impairment of Assets standards. The process for determining impairment for BII involves the computation of future earnings cash flows on a long term basis, discounted at long term rates to arrive at a value-in-use determination. Such a computation is necessarily protracted as it involves the stabilisation of earnings potential which requires a detailed review and assessment by the management team which is still being assembled at BII, and the stabilisation of the interest rate term structure (for discounting purposes). A similar review of the carrying value of our 20% equity stake in MCB and 15% equity stake in An Binh is being undertaken the same methodology as described above. Based on current available information, Maybank is confident that any impairment charge on the investments would not lead to a loss in net earnings ( profit after tax and MI) of the Group for the financial year ending 30 June 2009. This view is based on management’s current outlook on Maybank and its affiliates, based on their current earnings trajectory and a set of assumptions in the discount rates and earnings growth potential specific to the respective countries these investments are in. However, should the economic environment deteriorate beyond our current expectations or that there are unforeseen changes in circumstances, the abovementioned statement on full year profitability may be different.An impairment charge is a non-cash charge and does not affect the capital position of Maybank
Impairment treatment
Subsequent to 30 Sep 2008
Maybank entered into agreement with certain shareholders of BII to acquire additional 16.3% equity interest in BII at a price of Rp433 per share or c.RM1.26bn
10 Oct 2008
Maybank held a total equity interest of 71.86% in BII for a total purchase consideration of RM5.52bn
Represents a reduction in price of c.RM987m from the previous agreed price of Rp510 per share
1 Dec 2008
Post completion of tender offer, Maybank held a 97.5% equity interest in BII
Estimated cost of tender offer of RM1.95bn
27 Feb 2009
Release of Dec 2008 financial results
BII fully consolidated in Maybank’s accounts
Increase of goodwill from BII acquisition from RM2.92bn to RM6.00bn
…what has happened since 30 Sep 2008?30 Sep 2008
Maybank held a 55.6% stake in BII, reporting RM2.9bn goodwill from its acquisition
The Company also held a 20.0% stake in MCB which was impaired by RM242m in Q1 2009
30
Effect Of Rights Issue
Audited As at 30
June 2008
(I)After adjusted for
certain material transactions (1)
(II) After (I) and
Proposed Rights Issue
RM’000 RM’000 RM’000 Share capital 4,881,123 4,881,123 7,077,628 Non-distributable 6,290,874 6,290,874 10,089,758 Distributable 8,130,496 7,888,496 7,888,496
Total reserves 14,421,370 14,179,370 17,978,254 NA 19,302,493 19,060,493 25,055,882 Number of Shares 4,881,123 4,881,123 7,077,628 NA per Share (RM) 3.95 3.90 3.54 Borrowings 8,473,039 14,632,637 14,632,637 Shareholders’ funds 19,302,493 19,060,493 25,055,882 Gearing 0.44 0.77 0.58
The Proposed Rights Issue is subject to the approvals of the following: (i) the Securities Commission (“SC”) for:
(a) the Proposed Rights Issue; and (b) the listing of and quotation for the Rights Shares;
(ii) Bursa Malaysia Securities Berhad for the listing of and quotation for the Rights Shares;(iii) Bank Negara Malaysia for the increase in the issued and paid-up capital of Maybank;
the shareholders of Maybank at an Extraordinary General Meeting (“EGM”) to be convened; and
(iv) any other relevant authorities, if required.
This scenario assumes that the entire Unexercised ESOS Options are fully exercised prior to the Entitlement Date.
Maximum Scenario
This scenario assumes that none of the outstanding ESOS options relating to approximately 33,784,000 new Shares which have been granted to the directors and employees pursuant to the ESOS willbe exercised (“Unexercised ESOS Options”) prior to the Entitlement Date
Minimum Scenario
Minimum Scenario Maximum ScenarioNo. of Shares
’000No. of Shares
’000 As at 30 June 2008 4,881,123 4,881,123 Upon exercise of Unexercised ESOS Options (1) - 33,784 4,881, 123 4,914,907 To be issued pursuant to Proposed Rights Issue 2,196,505 2,211,708 After Proposed Rights Issue 7,077,628 7,126,615
Approvals
Effects on Issued and Paid-up Capital
Effects on NA & Gearing
Audited As at 30 June 2008
(I)After adjusted
for certain material
transactions (1)
(II)After (I) and exercise of
Unexercised ESOS Options (2)
(III) After (II) and
Proposed Rights Issue
RM’000 RM’000 RM’000 RM’000 Share capital 4,881,123 4,881,123 4,914,907 7,126,615 Non-distributable 6,290,874 6,290,874 6,525,725 10,351,214 Distributable 8,130,496 7,888,496 7,888,496 7,888,496
Total reserves 14,421,370 14,179,370 14,414,221 18,239,710 NA 19,302,493 19,060,493 19,329,128 25,366,325 Number of Shares 4,881,123 4,881,123 4,914,907 7,126,615 NA per Share (RM) 3.95 3.90 3.93 3.56 Borrowings 8,473,039 14,632,637 14,632,637 14,632,637 Shareholders’ funds 19,302,493 19,060,493 19,329,128 25,366,325 Gearing 0.44 0.77 0.76 0.58
Minimum
Maximum
31
Timeline
Announcement of rights issue27 February 09
Despatch of circularEarly March 09
EGMEnd March 09
Announcement of books closure dateMid March 09
Books closure dateEnd March 09
Despatch of abridged prospectusCommencement of Rights Trading period
Early April 09
Closing date of applicationsReceipt of application monies
Mid April 09
Listing of rights sharesEnd April 09
Cessation of Rights TradingEarly April 09
32
Conclusion
Strategic Transformation Plan to strengthen our Malaysian leadership and become a
top 5 bank in South and South East Asia
Pre-emptive rights issue is the next step towards achieving the Strategic Plan
⎯ Further strengthen our franchise and core business
⎯ Allow focus on capturing market share and business opportunities
⎯ Enhance our balance sheet and capital ratios
Our franchise is resilient despite the economic turmoil and the proposed rights issue
will place us in an even stronger position for long-term growth
33
Q & A
