Superbank in the Making?

July / August 2008

Malaysia's largest lender, Malayan Banking Bhd or Maybank, was singled out as a potential superbank by London-based Retail Banker International.

A string of back-to-back acquisitions recently has enabled the bank to expand its regional presence, in line with its goal of further diversifying its earnings outside Malaysia. Its acquisitions of a 15% stake in Pakistan's MCB Bank Ltd, 15% in Bank Internasional Indonesia (BII) and up to 100% in Vietnam's An Binh Bank will cost about RM11.5 (USD35.4) billion, to be funded by a mix of internal and external funds. Maybank projected that the three acquisitions will boost overseas revenue contributions from 19% to 31% eventually.

However, many investors and analysts' perception of the bank soured given the 'pricey' acquisitions in weak economic conditions, which could in turn affect the bank's return on equity and dividend payout, even though the bank has said that it will maintain its dividend payout rate of 60-65% over the long term. Maybank is paying an 11.4% premium to the market price for the MCB stake, which will cost RM2.17 (USD0.67) billions, with an option to purchase an additional 5% for RM785.5 (USD241.9) millions. It won the bid to buy up to a 100% stake in Bank Internasional Indonesia for RM8.6 (USD2.65) bil or 4.65 times book value, setting a new benchmark for Indonesian banking M&As since the average price-to-book valuation previously was about 2.5 times.

Although its plate is currently full, Maybank has indicated that it will not stop blazing the regional acquisition trail in future; the bank reportedly has Thailand and South Asia, particularly India, in its sights.