Maybank Says Annual Profit to Decline as Market Deteriorates

Bloomberg reports on Maybank:

Nov. 11 (Bloomberg) -- Malayan Banking Bhd., Malaysia's biggest bank by assets, expects profit to fall for a second year as the worldwide economic slowdown heightens the risk of bad debts and makes it harder to sell loans.

Maybank, as the Kuala Lumpur-based company is known, today reported a 22 percent drop in fiscal first quarter profit, and said the market will become ``more challenging.'' The chances of loan growth are ``moderate,'' and profit in the year ending June 2009 will be lower, the bank said in a statement.

Maybank this year embarked on its biggest overseas spending spree, paying $2 billion for control of Indonesia's sixth-largest lender, and for stakes in banks in Pakistan and Vietnam. Chief Executive Officer Abdul Wahid Omar, who joined in May, is digesting the assets in a financial crisis that's forecast to push Malaysian economic growth to an eight-year low in 2009.

``Challenges in the domestic market intensified following the global financial meltdown,'' Abdul Wahid said in the statement. ``We are adopting a conservative outlook for the financial year ahead.''

Net income at Maybank in the three months ended Sept. 30 fell to 572.2 million ringgit ($160 million), or 11.72 sen a share, from 735.4 million ringgit, or 15.12 sen, a year earlier. Profit fell even after a one-time gain of 483.8 million ringgit, which Maybank had earlier set aside in case the Indonesian deal failed and the Malaysian lender lost its deposit on the purchase.

Net interest income, or revenue from loans after deducting interest paid to depositors, fell 3.5 percent to 1.27 billion ringgit. General expenses, and personnel and marketing costs rose. The bank recovered fewer bad loans, while income from stock broking and insurance also fell, Maybank said.

`More Difficult'

Maybank stock has dropped 40 percent this year, trailing Malaysia's main share index, which has lost 38 percent in the same period. Maybank today fell 0.9 percent to 5.5 ringgit. Earnings were released after the stock exchange closed.

The market and the economic conditions have become ``more difficult,'' Maybank said in its statement. All this year's acquisitions aren't yet adding to profit, it said.

The bank this year spent S$1.77 billion ($1.2 billion) for control of PT Bank Internasional Indonesia, $742 million for 20 percent of Pakistan's MCB Bank Ltd. and $93 million for a 15 percent stake in Vietnam's An Binh Bank.

Abdul Wahid is seeking income outside his domestic market as prospects for earnings growth in Malaysia worsen.

Shrinking Profits

Profits at Malaysian banks, including Bumiputra-Commerce Holdings Bhd. and Public Bank Bhd., will shrink an average 6 percent in 2009 as bad debts rise, and loan growth and capital markets slow, analysts at Aseambankers Malaysia Bhd. said Nov. 3.

Bank loans in Malaysia will increase 4 percent to 5 percent next year, Aseambankers said, cutting its forecast from 7 percent to 8 percent.

Malaysia's government last week said 2009 economic growth will slow to 3.5 percent, the slowest in eight years, as the global financial crisis hurts worldwide trade.

In August, Abdul Wahid said he's seeking to expand in higher-growth nations including China and India, focusing on building its Islamic banking business in the region.

He set a target of being among the top five banks in South and Southeast Asia by assets, market value and performance by 2015.

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It's not going to be pretty at the rate things are going.