Reservations over Maybank’s Islamic shares proposal

Its CEO says PNB’s proposal will be deliberated and it is still premature to decide on it

by P PREM KUMAR / Pic by HUSSEIN SHAHARUDDIN

Malayan Banking Bhd (Maybank) has reservations over the proposal to carve out shares in the country’s largest banking group into Islamic shares.

Group president and CEO Datuk Abdul Farid Alias (picture) said Permodalan Nasional Bhd’s (PNB) proposal will be deliberated and it is still premature to decide on it, but any decision should be right and favourable to all shareholders.

“We thought the idea is quite interesting, but we do have reservations before considering the proposal,” he told a media briefing last Wednesday after announcing the group’s firsthalf (1H) financial results.

“The danger of going through this path (to convert into Islamic shares) is that we don’t want to create different classes of shares, neither do we want to create a subsidiary as well. We don’t intend to do that,” he said.

Maybank also has no plans to list its Islamic banking arm, said Abdul Farid.

Despite operating as a banking window in the group’s lending business, Maybank Islamic Bhd is the country’s largest Islamic bank based on asset.

He said the Shariah-compliant banking ecosystem in Malaysia has been doing very well and has allowed Maybank Group to grow its Islamic banking operation into the fifth-largest financial institution in the world.

“So, that model has worked and that is what’s best for our customers as well,” he added.

Earlier this month, PNB chairman Tan Sri Abdul Wahid Omar proposed that 20% of the group’s shares could be designated as i-shares, a way to boost and promote Islamic capital market further. PNB holds a 48% stake in Maybank .

Maybank registered a higher net profit of RM1.66 billion for the second-quarter ended June 30, 2017 (2Q17), from RM1.16 billion in the same period last year — due to higher interest income and a significant drop in net impairment losses.

Revenue for 2Q17, however, was almost flat at RM10.92 billion compared to RM10.94 billion previously.

Earnings per share stood at 16.06 sen per unit from RM11.79 sen per share as of 2Q16.

For the 1H of 2017, net profit rose 29.9% to RM3.36 billion from RM2.59 billion a year earlier.

The higher profit was helped by the 5.8% rise in net operating income, improved net interest margin by 13 basis points, as well as a 33.1% decline in net impairment losses compared to a year earlier.

Maybank chairman Datuk Mohaiyani Shamsudin said the 1H performance demonstrates the banking

group’s ability to consistently create value across markets and position the firm well to leverage on growth opportunities.

“We remain optimistic that our strong presence in the region will continue to sustain our development,” she said in a statement.

Maybank’s board of directors also declared a single-tier interim of 23 sen per share, under the group’s dividend reinvestment plan.

Comprising a cash portion of five sen per share and an electable portion of 18 sen per share, the interim dividend amounts to a payout of RM2.4 billion and represents 72.2% of net profit for the period.

Between January-June 2017, net operating income reached RM11.36 billion compared to RM10.74 billion a year earlier — underpinned by a robust 25.6% increase from insurance and takaful, and an 8% rise from group community financial services.

Net fund-based income rose 10.9% to RM8.26 billion from RM7.45 billion a year earlier, more than offsetting a marginal decline in net fee-based income of RM3.1 billion from RM3.29 billion last year.

Maybank recorded a 6.4% year-onyear increase in loans led by Malaysia (6.4%), Singapore (4.9%) and Indonesia (3.2%).

On the results, Abdul Farid said Maybank will continue to focus on building a strong, resilient and well-managed banking group.

“Our focus for the rest of 2017 will be to ensure responsible growth in our key markets and core businesses, while further improving our operational efficiency and risk management practices.

“We will also continue to be watchful over asset quality pressures that may persist, as well as the risk of heightened credit costs in some industries,” he said.