We will not be surprised if Maybank undertakes M&A activities next year
ALLIANCE INVESTMENT BANK ANALYST CHEAH KING YOONG
PETALING JAYA: Persistent global uncertainties, a challenging external operating environment coupled with the implementation of the Basel III framework next year may induce foreign banks to dispose their noncore assets or businesses in the region.
Banking analysts saw an opportunity for well-capitalised banks such as Malayan Banking Bhd (Maybank) to snap up such assets.
Maybank has among the highest capital equity tier-1 ratio (the ratio which measures the amount of capital a bank has) in the country at 9.3% compared to the average of 7% for its local peers.
This capital ratio is high enough to meet Basel III requirements, which kicks off next year.
Analysts at Hong Leong Investment Bank Bhd said Maybank’s current capital ratio was comparable to that of its regional peers and put the bank in a good position to fund regional growth.
Alliance Investment Bank Bhd analyst Cheah King Yoong said that while the bank has not planned any mergers and acquisitions ( M&As) and its management did not foresee engaging in such activity in the nearterm.
It would not disregard the possibility of buying assets in the next six to 12 months.
“As such, we will not be surprised
As such, we will not be surprised if Maybank undertakes M&A activities next year. — CHEAH KING YOONG
if Maybank undertakes M&A activities next year,” Cheah said, adding that the bank would need to have an M&A exercise if it wanted to expand overseas income contribution to about 40% from the current 28% over the next three years.
Of the 40%, he said between 28% and 33% of overseas contribution would come from organic growth and the remaining should come from M&As.
Analysts noted that Thailand continued to remain a focus for Maybank, following speculation that the bank was the buyer of a 7.6% stake in the Bank of Ayudhya pcl sold by General Electric, which turned out to be untrue.
Maybank’s presence in the country is currently through Maybank Kim Eng Securities.
“We believe that management remains interested to explore other potential M&A opportunities in Thailand, provided that the deal is both earnings and value accretive to shareholders, and allows Maybank to command absolute control of the acquiree,” Cheah said.
That said, increasing competition in the domestic banking industry partly due to the entrance of strong foreign players, following liberalisation could result in consolidation at home, with the bigger players swallowing up the smaller ones.
While analysts noted that Maybank had the financial muscle to conduct a local M&A, the benefits of regional M&As far outweighed the benefits of buying up a local player given the relatively saturated local market.