Saturday January 9, 2010
Tussle over EON Cap
FRESH into the new year, the sour relations between two major shareholders of EON Capital Bhd – Primus Partners (HK) Ltd and Rin Kei Mei – has erupted into a battleground for control.
Even as EON Cap is still strengthening its capital base and transformation process, Rin has decided to “throw in the towel’’ by grouping up with another major shareholder Tan Sri Tiong Hiew King to consider selling off a combined 31.7% stake to Hong Leong Bank Bhd. Thrown into the package is Khazanah Nasional Bhd’s 10% stake – bringing the larger combined stake under negotiations to 41.1%. The Employees Provident Fund (EPF), an institutional investor in almost every bank, has a 10.7% stake in the banking group. The total stake of these four investors comes up to 51.8%.
Primus owns 20.2%. EPF will make its decision on Hong Leong’s yet-to-be submitted proposal to buy the assets and liabilities of EON Cap purely as an investor, bearing in mind, that it is also a majority shareholder of Hong Leong Bank and other banks.
The advantage that Hong Leong has is that it is likely to bid for the assets and liabilities of EON Cap. That means it does not have to make a general offer. If a simple majority of shareholders vote to sell the assets and liabilities of EON Cap, the deal is done. The billion ringgit question is at what price will the major shareholders accept Hong Leong’s offer.
Primus appears to be deliberately keeping its cards close to its chest. Sources say it is not pleased by the turn of events, more so because it was caught by surprise when news of the potential stake sale was announced. But the bigger issue really is that having bought EON Cap at RM9.55 per share or at 55% premium (above the market price then of RM6.20) in early 2008, Primus would be mindful of any proposal that values the banking group at below that price.
At what price?
Like many other banking stocks, the recent financial crisis triggered by the US subprime mess had weighed heavily on EON Cap shares, sending it to a low of RM3; on the back of news of a potential takeover in recent weeks, the stock has risen significantly to a high of RM7 (on Friday).
Hong Leong, it is believed, is looking at an offer price of RM6 per share or slightly more than one time (1x) book value, a level that has sparked off strong protests from banking analysts as well as Primus, no doubt.
“A lot of strategic partnerships – Temasek/Alliance Financial Group; Bank of East Asia/Affin Holdings Bhd and EPF/RHB Capital Bhd – were done above one time book value. (The exception was Primus that bought its stake in EON Cap at more than two times book value).
“But those involving mergers or other forms – CIMB Bank Bhd merger with Southern Bank Bhd; privatisation of AmInvestment Group Bhd (AIGB) by AMMB Holdings Bhd; privatisation of CIMB by Bumiputra-Commerce Holdings Bhd and RHB Cap’s purchase of RHB Bank from Khazanah Nasional Bhd – were done at above two times book value,’’ a banking analyst points out.
Among the more recent deals, the Australian and New Zealand banking group (ANZ) had bought AMMB at 1.7 times book.
So, why should EON Cap be “sold cheap”, they question?
Even at the height of the financial crisis, Malaysian banks were not trading cheaply. EON Bank made a net profit of RM217.1mil for financial year (FY) ended Dec 31, 2007, and RM133.8mil for FY08; its return on equity is not very high but targeted to reach 15% in three years.
“The new senior staff they have recruited from various banks are high performers and will be out there to realise their aspirations,’’ says the analyst, adding that he will not be surprised if the bank manages to double its profits in five years.
“One can’t expect to pay just slightly over one time book value, and assume full management control,’’ scoffs another analyst.
“There are probably bankrupt companies on the cheap but there are no bargains in the Far East. There could have been at one time in the United States and Europe, where even the 100-year-old Lehman Brothers fell.’’
Divergent interests
Hong Leong’s Tan Sri Quek Leng Chan had sold 80% of his Hong Kong-based Dao Heng Bank Group Ltd to Singapore’s DBS Bank for HK$41.9bil cash windfall, via his overseas flagship Guoco Group Ltd. Reports estimate Guoco to be sitting pretty on RM18.9bil cash.
Doesn’t he have to spend it some day and why is he still so tight-fisted?
Analysts point out that Hong Leong Bank has been consistently paying out 24 sen dividend per share over the last five years even though its profit had doubled.
“If it doesn’t buy anything over the next two years, it will have to return that money to shareholders,’’ says an analyst.
Initially, market expectation for the takeover price was not exceeding 1.3 to 1.4 times book value or RM6.50 to RM7. That expectation is now raised to not more than 1.5 times or RM7.50.
Even if Rin and Tiong had bought their shares way below the so-called RM6 offer price, many regard it as a giveaway to sell below market price.
On the other hand, while Khazanah which already owns 28.4% in CIMB Bank, may want to rationalise its bank holdings it will still not give in to just any price or scheme.
The push factors would include the fact that EON Cap is trying to restructure but many others such as CIMB and Alliance Banking groups have gone way ahead.
Some analysts also view that EON Cap does not have a strong market share or a significant franchise in lending and deposit taking.
“Besides the pressure to top up capital, more investments are required in branding and information technology.
“From the reports surfacing, one gets the impression that different shareholders seem to want things run in different ways, which makes it difficult to see a smooth uptrend ahead,’’ says an observer.
But that does not necessarily entail selling on the cheap although it may not be easy to find a good buyer with solid cash and background in the same industry.
Going gets tough
The scenario for banks in Malaysia is not expected to get any easier, particularly post financial crisis. Observers speculate that this could be another reason behind Rin and Tiong’s decision to exit the bank (apart from the widely known hostility between them and Primus). As seasoned businessmen, they may be able to see the threats looming in the horizon which may also involve coughing up more money to beef up the bank’s capital position.
Scale and size will matter even more. While Malaysian banks are going regional, EON Cap, which has similar aspirations is still rather domestic centric and may end up playing a catch-up game.
There is also a sense that Primus had done a few misteps that were not highly favoured by the central bank. For instance, Primus had failed to honour its subscription of a large bonds-cum-warrants issue, proceeds of which would have been used to redeem a US-dollar subordinated debt.
Subsequently, some analysts worry how the authorities might view Primus, whose subsequent warrant issue was rejected by Bank Negara, if this Hong Leong deal does not go through.
Quite clearly, Bank Negara would like to see further consolidation in the sector even as it hands out licences to world class foreign and Islamic banks, a move many regard to be a subtle message to local banking groups to buck up.
What could happen
Over the week, Hong Leong received the nod from the central bank to start talks with the boards of EON Capital and EON Bank. (EON Cap wholly owns EON Bank) to acquire its assets and liabilities. Sources say the pricing depends on various factors. For one, it depends on the deal structure – will it involve a total cash or share transaction (this may be unlikely as it may bring to rise dilution concerns)? Or a cash and/or share transaction?
“There are shareholders who may prefer to swap their holding in EON for exposure to the enlarged Hong Leong group. They may prefer that than to exit altogether. So, the deal may likely involve a cash/share deal,” says an analyst.
When CIMB launched a takeover for Southern Bank Bhd (SBB), it used a similar assets and liabilities route that had a share exchange offer where SBB shareholders were allowed to receive shares, if they chose to.
The advisors for Hong Leong for this deal is CIMB. Details on the offer may emerge over the next week or so.
Hong Leong’s plan, which involves the purchase of assets and liabilities, requires a 50% approval from shareholders plus one share, which may mean that the deal can go through even without the support of Primus. Collectively, Rin, Tiong, Khazanah and EPF own 52.4% in EON Cap and if these four parties agree to accept the offer put forth by the Hong Leong group (or any other, for that matter,) it is very much a done deal.
Yet, industry observers say Primus can still frustrate the deal by dragging the process, given that it exerts significant influence on the board of EON Cap. And the premise may even be justifiable – the board should hold out for a better offer.
What is imperative however, says an observer, is that ultimately, even if the board is split on the deal, the offer ought to be put to shareholder vote: “The board is free to make their recommendation. This is why they hired Goldman Sachs and Ethos & Company. But ultimately, shareholders ought to be given a chance to express their views on the deal.”
“If for some reason, the board of EON Cap decides not to put the takeover bid up to shareholders to vote, all is not lost. Shareholders having 5% of the shares can call for an EGM to remove the board,’’ says a banker.
“But that’s a messy route and is not likely to happen ...,” he adds.
http://biz.thestar.com.my/news/story.asp?file=/2010/1/9/business/5438019&sec=business
Showing posts with label bank. Show all posts
Showing posts with label bank. Show all posts
Saturday, January 9, 2010
Merger with EON Bank will put HLB on 4th spot
Saturday January 9, 2010
Merger will put HLB on 4th spot
THE potential “marriage” between Hong Leong Bank Bhd (HLB) and EON Capital Bhd (EON Cap) will help to boost the former’s growth domestically and put it in a stronger competitive position in the face of liberalisation.
The merger will catapult HLB into the fourth largest bank in terms of assets in the country from its current sixth position.
The scale and size will also provide HLB with greater financial muscle to meet its aspirations as a regional player.
On the homefront, HLB will end up with a wider deposit-taking and loans franchise via a network of 338 bank branches nationwide (HLB and EON Cap currently has 199 and 139 bank branches respectively).
It will also enable the group to achieve better economies of scale in certain areas such as CASA (current account savings account) deposits, hire purchase (HP) and mortgages thus providing better pricing for consumers.
For individual segments, EON Cap has an estimated market share of 8.1% in the auto loan segment, while HLB’s is about 4.0%.
On a combined basis, the merger will raise the auto loan market share to a substantial 12.2%.
TA Research notes that EON Cap can help boost HLB’s small and medium enterprise (SME) business, which had not been growing very significantly over the past year.
HLB’s market share in the SME segment currently stands at a paltry 2.5% while EON Cap has around 4.8% of the industry’s total SME loans as at Sept 30, 2009.
In addition, AmResearch estimates that HLB’s market share of residential mortgage will be lifted to 10.3% from 7.1%.
“HLB’s profile of loans in terms of variable versus fixed rate loan will be rebalanced to 65.8% variable rate loan from the high of 75.6% currently,” it notes.
HLB’s current share of the local deposit market is 6.3%, but with this merger it will be boosted to 9.4%.
In terms of non-performing loans (NPLs), EON Cap’s transformation exercise which started in mid-2007 has helped to reduce its NPLs.
The group’s kitchen sinking exercises have resulted in a lower net NPL of 2.5% in the third quarter of 2009 (3Q09) versus 4.2% in 4Q07 and loan loss cover raised to 84.9% in 3Q09 (4Q07: 58.1%).
This will help to ensure that HLB’s asset quality, said to be one of the best in the banking sector, is not compromised.
ECM Libra points out that loan loss provisions have hardly made a dent in HLB’s earnings every quarter as it remains relatively small - RM162mil for financial year ended June 30, 2007 (FY07), RM159mil for FY08 and RM190mil for the nine months ended Sept 30, 2009 - in comparison with its total loans portfolio of over RM35bil.
“HLB’s net NPL ratio continues to improve, falling to 1.22% in the first quarter ended Sept 30, 2009 from 1.34% in the fourth quarter ended June 30, 2009, an achievement made all the more remarkable given the tepid growth in its loans book,” ECM Libra says.
EON Cap’s liquidity appears to be rather tight with a loan-to-deposit (LD) ratio in excess of 96% while HLB’s LD ratio hovers around 55%, the lowest in the industry.
The merger will help boost HLB’s low LD ratio which has resulted in a weakening in net interest income in recent quarters as well as EON Cap’s loans growth which is limited by its high LD ratio.
That said, OSK cautions that EON Cap’s inferior capital position and liquidity ratios will dilute HLB’s superior capital ratios.
Moreover, EON Cap’s weaker asset quality can give rise to a potential increase in NPLs and provisions, it notes.
Some analysts opine that apart from the kitchen-sinking of non-performing loans, EON Cap’s transformation programme had not improved its market positioning and franchise strengths.
“HLB’s transformation programme has worked very well for it. Given time, EON Cap’s transformation may be just as good especially if the merger takes place,” an analyst reckons.
HLB’s Business Transformation Programme which started in 2004 was a success and had helped the bank to make its first billion in pre-tax profit in FY08 as well as reduced NPLs.
The programme which focused on sustainable profitable growth scaled up the bank’s infrastructure and foundation and developed new capabilities.
http://biz.thestar.com.my/news/story.asp?file=/2010/1/9/business/5429585&sec=business
Monday, January 4, 2010
EPF, Khazanah exit EON Cap
Monday January 4, 2010
EPF, Khazanah exit EON Cap
Move likely to end with Hong Leong Bank in control
PETALING JAYA: Institutional investors, Khazanah Nasional Bhd and the Employees Provident Fund (EPF), are believed to have agreed to sell their combined 20.7% stake in EON Capital Bhd, sources told StarBiz.
This followed an earlier decision by two major shareholders – Rin Kei Mei and Tan Sri Tiong Hiew King – to seek permission to negotiate with Hong Leong Bank for the sale of their combined indirect stake of 31.7%.
“The pending deal for Hong Leong Bank’s proposed buyout of EON Capital Bhd seems to have reached a tipping point,’’ a source said. “The move of placing an additional 20.7% of EON Cap shares, on top of the combined indirect 31.7% held by Rin and Tiong, into Hong Leong’s hands would appear to seal EON Cap’s fate of being absorbed into an enlarged Hong Leong banking group.’’
The potential merged entity of Hong Leong Bank and EON Cap will create Malaysia’s fourth largest bank after Malayan Banking Bhd, CIMB Bank and Public Bank.
The sale by Khazanah and EPF of their respective stakes in EON Cap to Hong Leong will not come as a surprise to market watchers, given that the two state institutions have long mulled rationalising their bank holdings.
Khazanah and EPF already have a 28.4% and 57.5% respectively in CIMB Bank and RHB Capital Bhd.
According to a source familiar with the takeover bid, Hong Leong’s offer is likely to be pegged at RM5.50-RM6 per share.
“Khazanah and EPF are making this move to be in step with the larger government agenda of inducing market-driven consolidation of the banking sector, which many see as still lacking in scale and capital to meet the challenges of the next decade,’’ the source commented.
So far, Hong Leong Bank has approval from Bank Negara to negotiate with Rin through his private vehicles – Kualapura (M) Sdn Bhd and Lintang Emas Sdn Bhd – and Tiong via RH Development Corp Sdn Bhd.
Hong Leong is also believed to have asked for permission to talk to EON Cap as an institution, and not to individual or targeted shareholders, on its proposed takeover.
That approval is said to be still pending.
It is believed that the board of EON Cap, which met on Thursday, was advised to seek approval to negotiate on an institutional level with Hong Leong Bank on the latter’s proposed buyout offer.
Primus Partners (HK) Ltd, the private equity firm that had bought 20.2% of EON Cap at RM9.55 per share or RM1.34bil, is said to be very sore at the turn of events which involves an offer price from Hong Leong that values EON Cap at less than 1.3 times book value. The stock closed at RM6.84 on Thursday.
Primus, according to sources, is suggesting that it is better to go to the open market where EON Cap may fetch a higher counter bid and minority shareholders may also get a better deal.
Last week, StarBiz reported that Primus was believed to have approached Singapore’s Temasek Holdings Ltd for a joint-bid potentially through the Alliance banking group, in which Temasek holds 29.27%.
Some observers said the proposal was likely to be put to shareholders for their vote.
http://biz.thestar.com.my/news/story.asp?file=/2010/1/4/business/5402776&sec=business
Friday, November 27, 2009
New banking laws for swift action during future economic crisis
Friday November 27, 2009
New banking laws for swift action during future economic crisis
PETALING JAYA: The new Central Bank of Malaysia Act 2009, which repeals one of the oldest laws in Malaysia, the Central Bank of Malaysia Act 1958, is to strengthen Malaysia’s resilience to financial crises in a globalised environment.
According to a Bank Negara statement, the new Act provides comprehensive provisions to ensure swift and orderly resolution in the event of an imminent financial crisis to reduce its impact and costs to the domestic economy and to sustain public confidence.
“Provisions have been made for heightened surveillance, pre-emptive actions and resolution powers including the extension of liquidity assistance to entities not regulated by the central bank but which pose risks to the overall financial stability,” it said.
The new Act also provides for Bank Negara to have oversight over the money and foreign exchange markets, payment systems and for enhanced arrangements for cooperation with other supervisory authorities.
The exercise of the powers for the purposes of achieving financial stability shall be decided by the Financial Stability Executive Committee (FSEC) established under the Act.
The FSEC will comprise the governor, a deputy governor and at least three other members to be appointed on the recommendation of the bank’s board of directors.
Meanwhile, monetary policies, which are to maintain price stability while giving due regard to developments in the economy, would be formulated and implemented autonomously by a Monetary Policy Committee (MPC) established under the Act.
The new Act clearly outlines that the MPC would comprise seven to 11 members, including the governor and deputy governors, who will meet no less than six times a year.
“The members of the MPC must be persons of probity, competence and sound judgment with relevant expertise and experience,” the new Act states.
Other extensive safeguards of the new Act prescribe that monetary policy would only be formulated at a formally convened meeting of the MPC with a quorum of not less than two-thirds of its members.
As part of its efforts to enhance the governance framework to be more robust, the Board Governance Committee, the Board Audit Committee and the Board Risk Committee, consisting only of non-executive directors, would be established to assist Bank Negara’s board of directors in its oversight role of the management and performance review of the bank.
Consistent with the goal to promote Malaysia as an international centre for Islamic finance, the Act also gives due recognition to both the Islamic and conventional financial systems operating in parallel in Malaysia.
The new Act also provides for an enhanced role of the Syariah Advisory Council on Islamic Finance (SAC) whose members are appointed by the Yang di-Pertuan Agong on the advice of the finance minister after consultation with the bank.
The SAC “shall be the authority for the ascertainment of Islamic law for the purposes of Islamic financial business”, the new Act states.
Key changes under the new Act:
1. A more robust governance framework
2. Comprehensive provisions to ensure swift and orderly resolution in the event of an imminent financial crisis
3. Heightened surveillance, pre-emptive actions and resolution powers
4. Central bank to have oversight over the money and foreign exchange markets, payment systems and for enhanced arrangements for cooperation with other supervisory authorities
5. Monetary policy is to be formulated and implemented autonomously by a Monetary Policy 6. Committee established under the Act
6. Due recognition to both the Islamic and conventional financial systems operating in parallel in Malaysia
http://biz.thestar.com.my/news/story.asp?file=/2009/11/27/business/5194496&sec=business
New banking laws for swift action during future economic crisis
PETALING JAYA: The new Central Bank of Malaysia Act 2009, which repeals one of the oldest laws in Malaysia, the Central Bank of Malaysia Act 1958, is to strengthen Malaysia’s resilience to financial crises in a globalised environment.
According to a Bank Negara statement, the new Act provides comprehensive provisions to ensure swift and orderly resolution in the event of an imminent financial crisis to reduce its impact and costs to the domestic economy and to sustain public confidence.
“Provisions have been made for heightened surveillance, pre-emptive actions and resolution powers including the extension of liquidity assistance to entities not regulated by the central bank but which pose risks to the overall financial stability,” it said.
The new Act also provides for Bank Negara to have oversight over the money and foreign exchange markets, payment systems and for enhanced arrangements for cooperation with other supervisory authorities.
The exercise of the powers for the purposes of achieving financial stability shall be decided by the Financial Stability Executive Committee (FSEC) established under the Act.
The FSEC will comprise the governor, a deputy governor and at least three other members to be appointed on the recommendation of the bank’s board of directors.
Meanwhile, monetary policies, which are to maintain price stability while giving due regard to developments in the economy, would be formulated and implemented autonomously by a Monetary Policy Committee (MPC) established under the Act.
The new Act clearly outlines that the MPC would comprise seven to 11 members, including the governor and deputy governors, who will meet no less than six times a year.
“The members of the MPC must be persons of probity, competence and sound judgment with relevant expertise and experience,” the new Act states.
Other extensive safeguards of the new Act prescribe that monetary policy would only be formulated at a formally convened meeting of the MPC with a quorum of not less than two-thirds of its members.
As part of its efforts to enhance the governance framework to be more robust, the Board Governance Committee, the Board Audit Committee and the Board Risk Committee, consisting only of non-executive directors, would be established to assist Bank Negara’s board of directors in its oversight role of the management and performance review of the bank.
Consistent with the goal to promote Malaysia as an international centre for Islamic finance, the Act also gives due recognition to both the Islamic and conventional financial systems operating in parallel in Malaysia.
The new Act also provides for an enhanced role of the Syariah Advisory Council on Islamic Finance (SAC) whose members are appointed by the Yang di-Pertuan Agong on the advice of the finance minister after consultation with the bank.
The SAC “shall be the authority for the ascertainment of Islamic law for the purposes of Islamic financial business”, the new Act states.
Key changes under the new Act:
1. A more robust governance framework
2. Comprehensive provisions to ensure swift and orderly resolution in the event of an imminent financial crisis
3. Heightened surveillance, pre-emptive actions and resolution powers
4. Central bank to have oversight over the money and foreign exchange markets, payment systems and for enhanced arrangements for cooperation with other supervisory authorities
5. Monetary policy is to be formulated and implemented autonomously by a Monetary Policy 6. Committee established under the Act
6. Due recognition to both the Islamic and conventional financial systems operating in parallel in Malaysia
http://biz.thestar.com.my/news/story.asp?file=/2009/11/27/business/5194496&sec=business
Saturday, November 14, 2009
Overseas Banks in Malaysia
1. OCBC
Oversea-Chinese Banking Corporation Berhad (OCBC Bank) was born out of the Great Depression with the merger of three banks in 1932 - The Chinese Commercial Bank Limited (1912), the Ho Hong Bank Limited (1917) and the Oversea-Chinese Bank Limited (1919). OCBC Bank flourished to become one of the largest banks in Singapore and Malaysia. OCBC Bank was also the only foreign bank to have branches in China in the 1950s - its long history in China dates back to 1925 when it opened its first branch in Xiamen, the first Singapore bank to do so.
The Ho Hong Bank was a Malaysian bank established in (1917 - 1932) to provide banking services that prior to 1912 were solely delivered by European Banks. The Ho Hong Bank was founded by Lim Peng Siang, Dr. Lim Boon Keng and Seow Poh Leng all of whom were, before that time, officers of The Chinese Commercial Bank.
2. UOB
United Overseas Bank (UOB) was founded on 6 August 1935 by Sarawak-born Datuk Wee Kheng Chiang together with 6 other Chinese businessmen, under the name of United Chinese Bank (UCB). Through a series of acquisitions, UOB is now a leading bank in Asia.
In 1965, UCB changed name to United Overseas Bank and opened its first overseas branch in Hong Kong. In 1971, UOB acquired a majority interest in Chung Khiaw Bank Limited and its branch network in Singapore, Malaysia and Hong Kong, and introduced its red five-barred logo still in use today. In 1973, it acquired 100% shareholding in Lee Wah Bank Limited and its branch network in Singapore and Malaysia. UOB subsequently acquired Far Eastern Bank Limited in 1984, and Industrial & Commercial Bank Limited in 1987. Chung Khiaw Bank became a wholly-owned banking subsidiary of UOB in 1988. UOB acquired Westmont Bank in Philippines and Radanasin Bank in Thailand in 1999. In 2001, UOB acquired 100% shareholding in Overseas Union Bank Limited, and ICB in 2002. In 2005, UOB acquired a controlling stake of 53% in PT Bank Buana in Indonesia and renamed the bank to PT Bank UOB Buana (UOB Buana) in 2007.
Lee Wah Bank was incorporated in Singapore in 1920 and opened its first Malaysian branch in 1956.
3. Standard Chartered
The Standard Chartered Group was formed in 1969 through a merger of two banks. The Standard Bank of British South Africa founded in 1863, and the Chartered Bank of India, Australia and China (The Chartered Bank). The Chartered Bank was founded in 1851/1853 following the grant of a Royal Charter from Queen Victoria. It opened its first branches in 1858 in Calcutta and Bombay and soon after in Shanghai. The Standard Chartered Bank first began operations in Malaysia in Penang in 1875. The Bank has evolved from a bank supporting the trading community to a one-stop financial centre today, offering a full range of banking products and services in retail and wholesale banking. It has three core businesses namely Consumer Banking, Corporate and Institutional Banking and Treasury.
4. HSBC
The Hong Kong and Shanghai Banking Corporation (HSBC) was established in Hong Kong in March 1865 to finance the growing trade between China and Europe, with an office opened in Shanghai during April of that year. HSBC's presence in Malaysia dates back to more than 125 years. The Hongkong and Shanghai Banking Corporation Limited established its first branch in Malaysia in 1884, on the island of Penang, with privileges to issue currency notes. Thereafter, it opened branches in Ipoh in 1909 followed by branches in Malacca, Johore Bahru and Kuala Lumpur in 1910. The Kota Bharu branch was opened in 1912. By 1959, The Hongkong and Shanghai Banking Corporation Limited had embarked on a programme of acquisitions - including The Mercantile Bank and alliances and has network of 40 branches throughout Malaysia. Through the acquisition of The Mercantile Bank, which started operations in Malaysia in 1860, HSBC is indirectly the oldest bank in Malaysia.
The Mercantile Bank of India, London and China was established in October 1853 in Bombay (now Mumbai), but its headquarters moved to London in 1858.
5. RBS
The Royal Bank of Scotland was founded in 1727, with the first premises in the Old Town of Edinburgh, and has become one of the largest financial services groups in the world. During the 1900’s, it acquired several English banks including Williams Deacon's Bank, Glyn, Mills & Co and Drummonds Bank. In 1969, it merged with National Commercial Bank of Scotland to achieve a greater market share in Scotland. In 2000, it acquired National Westminster Bank (NatWest) in the biggest banking takeover ever in Britain and so inherited a rich heritage covering more than 200 banks that had made up NatWest. In 2007, in the biggest takeover in banking history, it led a unique consortium to acquire the Dutch bank ABN Amro.
ABN Amro was a prominent international bank, which traces its origins to Nederlandsche Handel-Maatschappij or Netherlands Trading Society (NTS) which was founded on the initiative of the Merchant Monarch, King Willem I, in the Hague on 29 March 1824. The object was to resuscitate national trade and industry in the wake of the period of French rule (1795-1813). NTS was an import/export company set up to expand existing trade relations and open up new channels. The growing concentration of banking in the Netherlands reached a climax in October 1964 when a merger between two of the Big Four Dutch bank, NTS and Twentsche Bank merged to become Algemene Bank Nederland (ABN Bank). A very important acquisition occurred in 1979 with ABN Bank’s take-over of Chicago-based LaSalle National Bank. This take-over laid the foundation for what would become the second home market of the bank. Founded in 1927 as National Builders Bank of Chicago, LaSalle Bank gave ABN its first firm foothold in the US Midwest. In 1990, Exchange Bancorp of Chicago was incorporated in LaSalle.
ABN Bank and Amro Bank decided in mid-1990 to combined forces, and the merger was completed rapidly after ABN AMRO Holding N.V. made a successful bid for the shares of both banks in August 1990. On 22 September 1991, the new ABN AMRO Bank was established, with its head office in Amsterdam.
Twentsche Bankvereeniging (TB) was established in Amsterdam on 24 June 1861 targeting the textile industry in the Twente region in the eastern part of the Netherlands and on financing textile exports to the Dutch East Indies. TB's first major post-war takeover was Van Ranzow's Bank in Arnhem in 1950, followed in 1952 by Van Mierlo en Zoon in Breda. The latter, however, continued to trade under its own name.
Amsterdam-Rotterdam Bank (Amro Bank) was created in 1964 between the merger of Amsterdamsche Bank (AB) and Rotterdamsche Bank (RB), after plans for a merger in 1939 were shelved due to the Second World War.
Rotterdamsche Bank (RB) was founded in Rotterdam on 16 May 1863 by a group of businessmen and bankers. On 19 April 1911, RB merged with Rotterdam's Deposito- en Administratie Bank (est. 1900) to form Rotterdamsche Bankvereeniging (Robaver).
Amsterdamsche Bank (AB) was established in Amsterdam on 5 December, 1871 by a group of mainly German banks led by Bank für Handel und Industrie of Darmstadt. Amsterdamsche Bank and Incasso-Bank signed an agreement in October 1947 under which the two banks merged. This considerably expanded AB’s branch network.
References:
http://www.rbs.com/about-rbs/g2/heritage/our-story/history-highlights.ashx
Oversea-Chinese Banking Corporation Berhad (OCBC Bank) was born out of the Great Depression with the merger of three banks in 1932 - The Chinese Commercial Bank Limited (1912), the Ho Hong Bank Limited (1917) and the Oversea-Chinese Bank Limited (1919). OCBC Bank flourished to become one of the largest banks in Singapore and Malaysia. OCBC Bank was also the only foreign bank to have branches in China in the 1950s - its long history in China dates back to 1925 when it opened its first branch in Xiamen, the first Singapore bank to do so.
The Ho Hong Bank was a Malaysian bank established in (1917 - 1932) to provide banking services that prior to 1912 were solely delivered by European Banks. The Ho Hong Bank was founded by Lim Peng Siang, Dr. Lim Boon Keng and Seow Poh Leng all of whom were, before that time, officers of The Chinese Commercial Bank.
2. UOB
United Overseas Bank (UOB) was founded on 6 August 1935 by Sarawak-born Datuk Wee Kheng Chiang together with 6 other Chinese businessmen, under the name of United Chinese Bank (UCB). Through a series of acquisitions, UOB is now a leading bank in Asia.
In 1965, UCB changed name to United Overseas Bank and opened its first overseas branch in Hong Kong. In 1971, UOB acquired a majority interest in Chung Khiaw Bank Limited and its branch network in Singapore, Malaysia and Hong Kong, and introduced its red five-barred logo still in use today. In 1973, it acquired 100% shareholding in Lee Wah Bank Limited and its branch network in Singapore and Malaysia. UOB subsequently acquired Far Eastern Bank Limited in 1984, and Industrial & Commercial Bank Limited in 1987. Chung Khiaw Bank became a wholly-owned banking subsidiary of UOB in 1988. UOB acquired Westmont Bank in Philippines and Radanasin Bank in Thailand in 1999. In 2001, UOB acquired 100% shareholding in Overseas Union Bank Limited, and ICB in 2002. In 2005, UOB acquired a controlling stake of 53% in PT Bank Buana in Indonesia and renamed the bank to PT Bank UOB Buana (UOB Buana) in 2007.
Lee Wah Bank was incorporated in Singapore in 1920 and opened its first Malaysian branch in 1956.
3. Standard Chartered
The Standard Chartered Group was formed in 1969 through a merger of two banks. The Standard Bank of British South Africa founded in 1863, and the Chartered Bank of India, Australia and China (The Chartered Bank). The Chartered Bank was founded in 1851/1853 following the grant of a Royal Charter from Queen Victoria. It opened its first branches in 1858 in Calcutta and Bombay and soon after in Shanghai. The Standard Chartered Bank first began operations in Malaysia in Penang in 1875. The Bank has evolved from a bank supporting the trading community to a one-stop financial centre today, offering a full range of banking products and services in retail and wholesale banking. It has three core businesses namely Consumer Banking, Corporate and Institutional Banking and Treasury.
4. HSBC
The Hong Kong and Shanghai Banking Corporation (HSBC) was established in Hong Kong in March 1865 to finance the growing trade between China and Europe, with an office opened in Shanghai during April of that year. HSBC's presence in Malaysia dates back to more than 125 years. The Hongkong and Shanghai Banking Corporation Limited established its first branch in Malaysia in 1884, on the island of Penang, with privileges to issue currency notes. Thereafter, it opened branches in Ipoh in 1909 followed by branches in Malacca, Johore Bahru and Kuala Lumpur in 1910. The Kota Bharu branch was opened in 1912. By 1959, The Hongkong and Shanghai Banking Corporation Limited had embarked on a programme of acquisitions - including The Mercantile Bank and alliances and has network of 40 branches throughout Malaysia. Through the acquisition of The Mercantile Bank, which started operations in Malaysia in 1860, HSBC is indirectly the oldest bank in Malaysia.
The Mercantile Bank of India, London and China was established in October 1853 in Bombay (now Mumbai), but its headquarters moved to London in 1858.
5. RBS
The Royal Bank of Scotland was founded in 1727, with the first premises in the Old Town of Edinburgh, and has become one of the largest financial services groups in the world. During the 1900’s, it acquired several English banks including Williams Deacon's Bank, Glyn, Mills & Co and Drummonds Bank. In 1969, it merged with National Commercial Bank of Scotland to achieve a greater market share in Scotland. In 2000, it acquired National Westminster Bank (NatWest) in the biggest banking takeover ever in Britain and so inherited a rich heritage covering more than 200 banks that had made up NatWest. In 2007, in the biggest takeover in banking history, it led a unique consortium to acquire the Dutch bank ABN Amro.
ABN Amro was a prominent international bank, which traces its origins to Nederlandsche Handel-Maatschappij or Netherlands Trading Society (NTS) which was founded on the initiative of the Merchant Monarch, King Willem I, in the Hague on 29 March 1824. The object was to resuscitate national trade and industry in the wake of the period of French rule (1795-1813). NTS was an import/export company set up to expand existing trade relations and open up new channels. The growing concentration of banking in the Netherlands reached a climax in October 1964 when a merger between two of the Big Four Dutch bank, NTS and Twentsche Bank merged to become Algemene Bank Nederland (ABN Bank). A very important acquisition occurred in 1979 with ABN Bank’s take-over of Chicago-based LaSalle National Bank. This take-over laid the foundation for what would become the second home market of the bank. Founded in 1927 as National Builders Bank of Chicago, LaSalle Bank gave ABN its first firm foothold in the US Midwest. In 1990, Exchange Bancorp of Chicago was incorporated in LaSalle.
ABN Bank and Amro Bank decided in mid-1990 to combined forces, and the merger was completed rapidly after ABN AMRO Holding N.V. made a successful bid for the shares of both banks in August 1990. On 22 September 1991, the new ABN AMRO Bank was established, with its head office in Amsterdam.
Twentsche Bankvereeniging (TB) was established in Amsterdam on 24 June 1861 targeting the textile industry in the Twente region in the eastern part of the Netherlands and on financing textile exports to the Dutch East Indies. TB's first major post-war takeover was Van Ranzow's Bank in Arnhem in 1950, followed in 1952 by Van Mierlo en Zoon in Breda. The latter, however, continued to trade under its own name.
Amsterdam-Rotterdam Bank (Amro Bank) was created in 1964 between the merger of Amsterdamsche Bank (AB) and Rotterdamsche Bank (RB), after plans for a merger in 1939 were shelved due to the Second World War.
Rotterdamsche Bank (RB) was founded in Rotterdam on 16 May 1863 by a group of businessmen and bankers. On 19 April 1911, RB merged with Rotterdam's Deposito- en Administratie Bank (est. 1900) to form Rotterdamsche Bankvereeniging (Robaver).
Amsterdamsche Bank (AB) was established in Amsterdam on 5 December, 1871 by a group of mainly German banks led by Bank für Handel und Industrie of Darmstadt. Amsterdamsche Bank and Incasso-Bank signed an agreement in October 1947 under which the two banks merged. This considerably expanded AB’s branch network.
References:
http://www.rbs.com/about-rbs/g2/heritage/our-story/history-highlights.ashx
Malaysian Achor Banks of 1999
In 1999, emerging from the Asian Financial Crisis and other financial issues, and in line with the Government’s plan to consolidate the banking and finance industry, the Government announced the following 10 anchor banks:
1. Malayan Banking
2. Bumiputra-Commerce Bank
3. Public Bank
4. RHB Bank
5. Arab-Malaysian Bank
6. EON Bank
7. Multi-Purpose Bank
8. Hong Leong Bank
9. Affin Bank
10. Southern Bank
Maybank
Malayan Banking, or Maybank, is the largest financial services group in Malaysia boasting group assets worth RM301 billion (USD$87 billion), placing it among the top 120 banks worldwide. It has the largest network of branches with over 374 branches and owns the largest ATM network in Malaysia with over 900 ATMs. Todate, Maybank has more than 4 million deposit accounts and more than half a million loan accounts.
In August 2000, Maybank announced the merger of the commercial banking business under Phileo Allied Bank and the securities business under Phileo Securities with that of Maybank and Mayban Securities respectively.
On 1 January 2001, Maybank also announced the merger of The Pacific Bank with Maybank.
Malayan Banking was formed by Malaysian business tycoon Khoo Teck Puat with a few partners in Kuala Lumpur. It was incorporated on 31 May 1960 and commenced operations on 12 September 1960. The bank grew rapidly to more than 150 branches within 3 years, but in 1965, Khoo Teck Puat was ousted from Maybank by the Government of Malaysia under the then Deputy Prime Minister Tun Abdul Razak's administration on the pretext of pumping the bank's money into his own private firm in Singapore. The bank formed its own investment banking subsidiary, Aseambankers Malaysia Berhad (Asian & Euro-American Merchant Banking (Malaysia) Berhad) in 1973. In 1993, the bank acquired a local insurance company, Safety Life & General insurance Sdn Bhd, and relaunched it as Mayban Life Assurance to focus solely in bankassurance. In 2005, the insurance arm acquired MNI Insurance and Takaful Nasional, and subsequently rebranded its insurance companies to Eitqa in 2008.
The Pacific Bank was established in 1919 and was listed on the KLSE in August 1990 …
PhileoAllied Bank ….
CIMB Bank
CIMB Bank, the consumer banking are of CIMB Group, was rebranded to its current name in 2006 to reflect its group restructuring and the completion of the merger between Bumiputra-Commerce Bank and Southern Bank Berhad.
Bumiputra-Commerce Bank (BCB) was formed in October 1999 through the merger of Bank of Commerce (BoC) and Bumiputra Bank Malaysia Berhad (BBMB) resulting in the biggest merger in Malaysia's banking history.
Bank Bumiputra was established in 1965 in line with government initiatives to increase the Bumiputra participation in the national economy. By the 1980s, it had become the largest bank in the country in terms of assets and was the first domestic bank to have operations in New York, London, Tokyo, Bahrain and Hong Kong. In 1982, it was listed as the largest bank in Southeast Asia by Asian Finance magazine.
The history of Bank of Commerce goes back to November 1979 when Bian Chiang Bank was renamed Bank of Commerce on the acquisition by the UMNO-owned Fleet Group and co-shareholder JP Morgan. Bian Chiang Bank was established in 194 in Kuching by Wee Kheng Chiang, focusing mainly in business financing and the issuance of bills of exchange.
In November 1991, the acquisition of United Asian Bank (UAB) by Bank of Commerce was the starting point for the significant expansion of this nascent force in banking. With the acquisition, the Bank of Commerce branch network increased almost fourfold, complementing its established reputation in the corporate lending market.
United Asian Bank (UAB) was established in Kuala Lumpur in 1972 as a result of the merger of three Indian-owned banks; Indian Overseas Bank Ltd, Indian Bank Ltd and United Commercial Bank Ltd. UAB started as a joint-venture in banking between Malaysia and India, taking over the operations of the Malaysian branches of the Indian banks in 1972.
Southern Bank was founded as Southern Banking Limited in 1965 by the late Tan Sri Saw Seng Kew in Penang and quickly expanded to other parts of the country. In 1978, the bank set up operations in Kuala Lumpur and became recognised as an important player in wealth management products, credit cards and SME lending. The bank was the first in the country to set up the MEPS / ATM system used throughout Malaysia today. Southern Bank was one of the anchor banks announced in 1999, in which Southern Bank acquired Ban Hin Lee Bank. Ban Hin Lee Bank (BHLB) was also established in Penang. Formed in 1935 by “Towkay” Yeap Chor Ee, it originally focused on serving local businessmen in their trading and merchant activities. In the 1960's, it branched into real estate and house financing eventually reaching throughout Malaysia and Singapore from its headquarters in Penang, though it mainly served the Penang region.
RHB Bank
RHB Bank was formed in 1997 as a result of the merger between DCB Bank and Kwong Yik Bank. In line with the government’s plan to consolidate the banking industry, the merger between Sime Bank and RHB Bank was finalized in 1999 to form the RHB Banking Group, resulting in the third largest banking group in Malaysia. In 2003, the RHB Banking Group completed its merger with Bank Utama, offering its customers a wider network of 200 branches nationwide, 470 ATMs and new products and services, such as internet banking.
DCB Bank was established in 1966 as Development and Commercial Bank (D&C Bank) by the late Tun Sir H. S. Lee, a well known entrepreneur and the first Minister of Finance for the country. D&C Bank became the 5th largest Malaysian bank by the late 80’s. In 1990, a majority shareholding of the bank was sold to Abdul Rashid Hussain, the owner of the then largest stock brokerage firm, Rashid Hussain Bhd which was founded in 1982.
Kwong Yik Bank was established in 1913 with a start-up capital of RM300,000 at the Old Market Square in Kuala Lumpur, making it Malaya’s first local bank . In 1996, Abdul Rashid Hussain acquired a 75% stake in Kwong Yik Bank at RM2.3bil and its merger with DCB Bank in 1997 formed the RHB Bank, making it the country’s biggest ever banking merger at that time. 1999, he bought the troubled Sime Bank for RM852.2mil.
Sime Bank was initially set up in 1959 as the United Malayan Banking Corporation (UMBC) by a group of businessmen, led by Mr Chang Ming Thien, a prominent figure in the rubber industry in Malaya and Singapore. The bank was officially declared open by the then Prime Minister, Tunku Abdul Rahman in 1960 as the first commercial bank to be established in independent Malaya. In 1996, UMBC became part of the Sime Darby Group and was renamed Sime Bank Berhad.
Bank Utama (Malaysia) Berhad was first incorporated in 1976 in Sarawak as the first bumiputra-owned bank.
Public Bank
Public Bank merged with Hock Hua Bank in 1999 as part of the government’s merger programme for domestic banking institutions. With this merger, Public Bank saw an increase in its domestic branch network to 381 branches in Malaysia from 345 branches, comprising 213 commercial bank branches and 168 finance company branches.
Public Bank was founded in 1966 by Tan Sri Teh Hong Piow, who began his banking career in 1950 as a bank clerk in Overseas-Chinese Banking Corporation Ltd. and rose in rank to officer within five years. He joined Malayan Banking Berhad as Manager in 1960, and later in 1964, was promoted to the position of General Manager at the age of 34. He left Malayan Banking in 1966 to set up Public Bank. Public Bank is the largest domestic bank in Malaysia by market capitalisation and the third largest by balance sheet. The Public Bank Group employs close to 16,000 people in 2009 – with about 90% of the staff in Malaysia and the remaining spread across Hong Kong and the People’s Republic of China, Cambodia, Vietnam, Laos and Sri Lanka.
Hock Hua Bank was founded in 1952 and became Sarawak’s regional bank. With an established customer base in the state of Sarawak especially in the retail consumer and commercial sectors, Hock Hua Bank complemented and enhanced Public Bank’s similar focus and specialization in the retail and commercial segment.
AmBank
Arab-Malaysian Bank Berhad commenced operations on 1 August 1994, when the AMMB Group acquired the Malaysian operations of Security Pacific Asian Bank Limited from Bank of America (Asia) Limited. On 1 June 2005, the merger of AmBank and AmFinance took place to create AmBank (M) Berhad, the sixth largest domestic bank in the country. On 18 May 2007, AmBank Group commemorated the entry of Australia and New Zealand Banking Group Limited (ANZ Bank) as its strategic partner and major investor.
The AMMB Group began its finance business in 1977, when the Group acquired a 70.0% shareholding in Malaysian Industrial Finance Company Limited (“MIFCL”), which was later renamed Arab-Malaysian Finance Berhad (“AMFB”). In 1990, AMFB acquired First Malaysia Finance Berhad. In line with the Government’s plan to consolidate the industry, AMFB acquired Abrar Finance Berhad in 1998, and MBf Finance Berhad in 2001.
The AMMB Group traces its roots to Arab-Malaysian Development Bank Berhad which was incorporated on 5 August 1975 as a joint venture between Malaysian Industrial Development Finance Berhad, with a 55.0% shareholding, Arab Investments for Asia (Kuwait) with a 33.0% shareholding, and the National Commercial Bank (Saudi Arabia) holding 12.0%.
Mbf Finance was a major finance institution in the country which was built up by the late Loy Hean Heong from the time he purchased Malaysia Borneo Finance Corp. in 1974.
Hong Leong Bank
Hong Leong Bank merged with Wah Tat Bank Berhad and Credit Corporation (Malaysia) Berhad in 2000 as part of the government’s directive for the domestic banking institutions consolidation programme. In 2004, the finance business of Hong Leong Finance Berhad was acquired by Hong Leong Bank. Hong Leong Finance was operating in Malaysia since 1968.
Hong Leong Bank started its humble beginnings in 1905 in Kuching, Sarawak, Malaysia under the name of Kwong Lee Mortgage & Remittance Company and later in 1934, incorporated as Kwong Lee Bank Limited. On 2 February 1983, it changed its name to Malayan United Bank Berhad after the acquisition by Khoo Kay Peng of Malayan Industries Bhd, a former OCBC banker. On 26 June 1989, it changed name to MUI Bank Berhad, operating in 35 branches. In January 1994, the Hong Leong Group acquired MUI Bank and assumed its present name. In that the same year in October, Hong Leong Bank was listed on the Kuala Lumpur Stock Exchange.
Wah Tat Bank started business as Wah Tat Money Exchange and Remittances in Sibu, Sarawak during the Rajah Brooke’s reign in 1929.
EON Bank
EON Bank as of 2008 has a branch network of 136 branches and over 5,000 employees serving a customer base of more than 1,000,000. Its total assets stood at RM41,563 billion as at 30 June 2008.
Kong Ming Bank was founded by the late Datuk Sri Ling Beng Sung in Sarawak in 1965, serving mostly the Sarawak region. In 1991, the bank was acquired by the Edaran Otomobil Nasional (EON) and assumed its present name. EON was established to distribute Malaysia's first national car, Proton. In 2006?, Hong Kong-based principal investment company Primus Pacific Partners, acquired a 20% stake in EON Capital Bhd to enable it to exploit the opportunities in the Malaysian financial sector.
Oriental Bank was founded in 1937…
Affin Bank
Affin Bank commenced operations using its current name in January 2001 following a merger between the former Perwira Affin Bank Berhad and BSN Commercial (M) Berhad in August 2000. In June 2005, pursuant to the amendment to the BAFIA 1989, it again merged with the former Affin-ACF Finance Berhad. To date, Affin Bank has a network of 82 branches nationwide.
Affin Bank was established incorporated in 1975 under the name Perwira Habib Bank Malaysia Berhad. It started as a joint venture between several Malaysian parties including LTAT, Syarikat Permodalan Kebangsaan Berhad, and Habib Bank Limited of Pakistan. In 1991, the Bank embarked on a capital restructuring resulting in the emergence of Affin Holdings Berhad as its largest shareholder in 1992. It later changed its name to Perwira Affin Bank Berhad.
BSN Commercial Bank was incorporated in Malaysia on 16 July 1975 under the name of Bank Buruh (Malaysia) Berhad. It changed its name to BSN Commercial Bank after it was acquired by Bank Simpanan Nasional (BSN) from bankrupt Central Co-operative Bank (CCB) on 11 March 1995.
Alliance Bank
Alliance Financial Group (formerly known as Alliance Banking Group) was founded in early 2001 through a consolidation of 7 financial institutions, in which Multi Purpose Bank Berhad anchored the merger. Besides Multi-Purpose Bank Bhd, the other institutions were International Bank Malaysia Bhd, Bolton Finance Bhd, Bumiputra Merchant Bankers Bhd, Sabah Bank Bhd, Sabah Finance Bhd and Amanah Merchant Bank Bhd.
Multi Purpose Bank first commenced operations in 1958 as Banque de L'indochine, and later changed its name to Banque Indosuez in 1975. In 1982, Banque Indosuez was incorporated into the Malaysian French Bank Berhad. With the corporate restructuring resulting in a majority stake in the bank by Multi-Purpose Capital Holdings Berhad, it was renamed as Multi-Purpose Bank in 1996.
Sabah Bank was incorporated by the State Government of Sabah on 9 August 1977 under the name of Bank Pembangunan Sabah Berhad, as a public limited company under the Companies Act, 1965.
==
Banking Groups announced by Bank Negara
1.Malayan Banking Bhd (MayBank) :
Mayban Finance Bhd, Aseambankers Malaysia Bhd, PhileoAllied Bank Bhd, Pacific Bank Bhd, Sime Finance Bhd and Kewangan Bersatu Bhd
2. The Bumiputra – Commerce Bank Bhd
Bumiputra-Commerce Finance Bhd and Commerce International Merchant Bankers Bhd
3. RHB Bank Bhd
RHB Sakura Merchant Bankers Bhd, Delta Finance Bhd and Interfinance Bhd
4. Public Bank
Public Bank Bhd, Public Finance Bhd, Hock Hua Bank Bhd, Advance Finance Bhd and Sime Merchant Bankers Bhd
5. The Arab Malaysian Bank Bhd (AMMB)
Arab Malaysian Finance Bhd, Arab Malaysian Merchant Bank Bhd, Bank Utama Malaysia Bhd and Utama Merchant Bankers Bhd
6. Hong Leong Bank Bhd
Hong Leong Finance Bhd, Wah Tat Bank Bhd and Credit Corporation Malaysia Bhd
7. Perwira Affin Bank Bhd
Affin Finance Bhd, Perwira Affin Merchant Bankers Bhd, BSN Commercial Bank Bhd, BSN Finance Bhd and BSN Merchant Bank Bhd
8. Multi-Purpose Bank Bhd
International Bank Malaysia Bhd, Sabah Bank Berhad, MBf Finance Bhd, Bolton Finance Bhd, Sabah Finance Bhd, Bumiputra Merchant Bankers Bhd and Amanah Merchant Bank Bhd
9. EON Bank Bhd
EON Finance Bhd, Oriental Bank Bhd, City Finance Bhd, Perkasa Finance Bhd and Malaysian International Merchant Bankers Bhd
10. Southern Bank Bhd
Ban Hin Lee Bank Bhd, Cempaka Finance Bhd, United Merchant Finance Bhd, Perdana Finance Bhd and Perdana Merchant Bankers Bhd
Source: Bank Negara Malaysia
Reference
http://www.maybank2u.com.my/corporate/achievement.shtml
http://www.maybank2u.com.my/corporate/notice3.shtml
http://www.maybank2u.com.my/corporate/press_release/archives/aug30_2.shtml
http://www.cimb.com/index.php?ch=group_ch_acg&pg=group_pg_acg_oh&ac=609&tpt=cimb_group
http://www.rhb.com.my/corporate_profile/history.shtm
http://www.ambg.com.my/ambank_webmedia/file/Our%20History.pdf
http://www.hlb.com.my/ahlb/inv_his.jsp?flag=inv_his
http://www.alliancebank.com.my/ourhistory.html
1. Malayan Banking
2. Bumiputra-Commerce Bank
3. Public Bank
4. RHB Bank
5. Arab-Malaysian Bank
6. EON Bank
7. Multi-Purpose Bank
8. Hong Leong Bank
9. Affin Bank
10. Southern Bank
Maybank
Malayan Banking, or Maybank, is the largest financial services group in Malaysia boasting group assets worth RM301 billion (USD$87 billion), placing it among the top 120 banks worldwide. It has the largest network of branches with over 374 branches and owns the largest ATM network in Malaysia with over 900 ATMs. Todate, Maybank has more than 4 million deposit accounts and more than half a million loan accounts.
In August 2000, Maybank announced the merger of the commercial banking business under Phileo Allied Bank and the securities business under Phileo Securities with that of Maybank and Mayban Securities respectively.
On 1 January 2001, Maybank also announced the merger of The Pacific Bank with Maybank.
Malayan Banking was formed by Malaysian business tycoon Khoo Teck Puat with a few partners in Kuala Lumpur. It was incorporated on 31 May 1960 and commenced operations on 12 September 1960. The bank grew rapidly to more than 150 branches within 3 years, but in 1965, Khoo Teck Puat was ousted from Maybank by the Government of Malaysia under the then Deputy Prime Minister Tun Abdul Razak's administration on the pretext of pumping the bank's money into his own private firm in Singapore. The bank formed its own investment banking subsidiary, Aseambankers Malaysia Berhad (Asian & Euro-American Merchant Banking (Malaysia) Berhad) in 1973. In 1993, the bank acquired a local insurance company, Safety Life & General insurance Sdn Bhd, and relaunched it as Mayban Life Assurance to focus solely in bankassurance. In 2005, the insurance arm acquired MNI Insurance and Takaful Nasional, and subsequently rebranded its insurance companies to Eitqa in 2008.
The Pacific Bank was established in 1919 and was listed on the KLSE in August 1990 …
PhileoAllied Bank ….
CIMB Bank
CIMB Bank, the consumer banking are of CIMB Group, was rebranded to its current name in 2006 to reflect its group restructuring and the completion of the merger between Bumiputra-Commerce Bank and Southern Bank Berhad.
Bumiputra-Commerce Bank (BCB) was formed in October 1999 through the merger of Bank of Commerce (BoC) and Bumiputra Bank Malaysia Berhad (BBMB) resulting in the biggest merger in Malaysia's banking history.
Bank Bumiputra was established in 1965 in line with government initiatives to increase the Bumiputra participation in the national economy. By the 1980s, it had become the largest bank in the country in terms of assets and was the first domestic bank to have operations in New York, London, Tokyo, Bahrain and Hong Kong. In 1982, it was listed as the largest bank in Southeast Asia by Asian Finance magazine.
The history of Bank of Commerce goes back to November 1979 when Bian Chiang Bank was renamed Bank of Commerce on the acquisition by the UMNO-owned Fleet Group and co-shareholder JP Morgan. Bian Chiang Bank was established in 194 in Kuching by Wee Kheng Chiang, focusing mainly in business financing and the issuance of bills of exchange.
In November 1991, the acquisition of United Asian Bank (UAB) by Bank of Commerce was the starting point for the significant expansion of this nascent force in banking. With the acquisition, the Bank of Commerce branch network increased almost fourfold, complementing its established reputation in the corporate lending market.
United Asian Bank (UAB) was established in Kuala Lumpur in 1972 as a result of the merger of three Indian-owned banks; Indian Overseas Bank Ltd, Indian Bank Ltd and United Commercial Bank Ltd. UAB started as a joint-venture in banking between Malaysia and India, taking over the operations of the Malaysian branches of the Indian banks in 1972.
Southern Bank was founded as Southern Banking Limited in 1965 by the late Tan Sri Saw Seng Kew in Penang and quickly expanded to other parts of the country. In 1978, the bank set up operations in Kuala Lumpur and became recognised as an important player in wealth management products, credit cards and SME lending. The bank was the first in the country to set up the MEPS / ATM system used throughout Malaysia today. Southern Bank was one of the anchor banks announced in 1999, in which Southern Bank acquired Ban Hin Lee Bank. Ban Hin Lee Bank (BHLB) was also established in Penang. Formed in 1935 by “Towkay” Yeap Chor Ee, it originally focused on serving local businessmen in their trading and merchant activities. In the 1960's, it branched into real estate and house financing eventually reaching throughout Malaysia and Singapore from its headquarters in Penang, though it mainly served the Penang region.
RHB Bank
RHB Bank was formed in 1997 as a result of the merger between DCB Bank and Kwong Yik Bank. In line with the government’s plan to consolidate the banking industry, the merger between Sime Bank and RHB Bank was finalized in 1999 to form the RHB Banking Group, resulting in the third largest banking group in Malaysia. In 2003, the RHB Banking Group completed its merger with Bank Utama, offering its customers a wider network of 200 branches nationwide, 470 ATMs and new products and services, such as internet banking.
DCB Bank was established in 1966 as Development and Commercial Bank (D&C Bank) by the late Tun Sir H. S. Lee, a well known entrepreneur and the first Minister of Finance for the country. D&C Bank became the 5th largest Malaysian bank by the late 80’s. In 1990, a majority shareholding of the bank was sold to Abdul Rashid Hussain, the owner of the then largest stock brokerage firm, Rashid Hussain Bhd which was founded in 1982.
Kwong Yik Bank was established in 1913 with a start-up capital of RM300,000 at the Old Market Square in Kuala Lumpur, making it Malaya’s first local bank . In 1996, Abdul Rashid Hussain acquired a 75% stake in Kwong Yik Bank at RM2.3bil and its merger with DCB Bank in 1997 formed the RHB Bank, making it the country’s biggest ever banking merger at that time. 1999, he bought the troubled Sime Bank for RM852.2mil.
Sime Bank was initially set up in 1959 as the United Malayan Banking Corporation (UMBC) by a group of businessmen, led by Mr Chang Ming Thien, a prominent figure in the rubber industry in Malaya and Singapore. The bank was officially declared open by the then Prime Minister, Tunku Abdul Rahman in 1960 as the first commercial bank to be established in independent Malaya. In 1996, UMBC became part of the Sime Darby Group and was renamed Sime Bank Berhad.
Bank Utama (Malaysia) Berhad was first incorporated in 1976 in Sarawak as the first bumiputra-owned bank.
Public Bank
Public Bank merged with Hock Hua Bank in 1999 as part of the government’s merger programme for domestic banking institutions. With this merger, Public Bank saw an increase in its domestic branch network to 381 branches in Malaysia from 345 branches, comprising 213 commercial bank branches and 168 finance company branches.
Public Bank was founded in 1966 by Tan Sri Teh Hong Piow, who began his banking career in 1950 as a bank clerk in Overseas-Chinese Banking Corporation Ltd. and rose in rank to officer within five years. He joined Malayan Banking Berhad as Manager in 1960, and later in 1964, was promoted to the position of General Manager at the age of 34. He left Malayan Banking in 1966 to set up Public Bank. Public Bank is the largest domestic bank in Malaysia by market capitalisation and the third largest by balance sheet. The Public Bank Group employs close to 16,000 people in 2009 – with about 90% of the staff in Malaysia and the remaining spread across Hong Kong and the People’s Republic of China, Cambodia, Vietnam, Laos and Sri Lanka.
Hock Hua Bank was founded in 1952 and became Sarawak’s regional bank. With an established customer base in the state of Sarawak especially in the retail consumer and commercial sectors, Hock Hua Bank complemented and enhanced Public Bank’s similar focus and specialization in the retail and commercial segment.
AmBank
Arab-Malaysian Bank Berhad commenced operations on 1 August 1994, when the AMMB Group acquired the Malaysian operations of Security Pacific Asian Bank Limited from Bank of America (Asia) Limited. On 1 June 2005, the merger of AmBank and AmFinance took place to create AmBank (M) Berhad, the sixth largest domestic bank in the country. On 18 May 2007, AmBank Group commemorated the entry of Australia and New Zealand Banking Group Limited (ANZ Bank) as its strategic partner and major investor.
The AMMB Group began its finance business in 1977, when the Group acquired a 70.0% shareholding in Malaysian Industrial Finance Company Limited (“MIFCL”), which was later renamed Arab-Malaysian Finance Berhad (“AMFB”). In 1990, AMFB acquired First Malaysia Finance Berhad. In line with the Government’s plan to consolidate the industry, AMFB acquired Abrar Finance Berhad in 1998, and MBf Finance Berhad in 2001.
The AMMB Group traces its roots to Arab-Malaysian Development Bank Berhad which was incorporated on 5 August 1975 as a joint venture between Malaysian Industrial Development Finance Berhad, with a 55.0% shareholding, Arab Investments for Asia (Kuwait) with a 33.0% shareholding, and the National Commercial Bank (Saudi Arabia) holding 12.0%.
Mbf Finance was a major finance institution in the country which was built up by the late Loy Hean Heong from the time he purchased Malaysia Borneo Finance Corp. in 1974.
Hong Leong Bank
Hong Leong Bank merged with Wah Tat Bank Berhad and Credit Corporation (Malaysia) Berhad in 2000 as part of the government’s directive for the domestic banking institutions consolidation programme. In 2004, the finance business of Hong Leong Finance Berhad was acquired by Hong Leong Bank. Hong Leong Finance was operating in Malaysia since 1968.
Hong Leong Bank started its humble beginnings in 1905 in Kuching, Sarawak, Malaysia under the name of Kwong Lee Mortgage & Remittance Company and later in 1934, incorporated as Kwong Lee Bank Limited. On 2 February 1983, it changed its name to Malayan United Bank Berhad after the acquisition by Khoo Kay Peng of Malayan Industries Bhd, a former OCBC banker. On 26 June 1989, it changed name to MUI Bank Berhad, operating in 35 branches. In January 1994, the Hong Leong Group acquired MUI Bank and assumed its present name. In that the same year in October, Hong Leong Bank was listed on the Kuala Lumpur Stock Exchange.
Wah Tat Bank started business as Wah Tat Money Exchange and Remittances in Sibu, Sarawak during the Rajah Brooke’s reign in 1929.
EON Bank
EON Bank as of 2008 has a branch network of 136 branches and over 5,000 employees serving a customer base of more than 1,000,000. Its total assets stood at RM41,563 billion as at 30 June 2008.
Kong Ming Bank was founded by the late Datuk Sri Ling Beng Sung in Sarawak in 1965, serving mostly the Sarawak region. In 1991, the bank was acquired by the Edaran Otomobil Nasional (EON) and assumed its present name. EON was established to distribute Malaysia's first national car, Proton. In 2006?, Hong Kong-based principal investment company Primus Pacific Partners, acquired a 20% stake in EON Capital Bhd to enable it to exploit the opportunities in the Malaysian financial sector.
Oriental Bank was founded in 1937…
Affin Bank
Affin Bank commenced operations using its current name in January 2001 following a merger between the former Perwira Affin Bank Berhad and BSN Commercial (M) Berhad in August 2000. In June 2005, pursuant to the amendment to the BAFIA 1989, it again merged with the former Affin-ACF Finance Berhad. To date, Affin Bank has a network of 82 branches nationwide.
Affin Bank was established incorporated in 1975 under the name Perwira Habib Bank Malaysia Berhad. It started as a joint venture between several Malaysian parties including LTAT, Syarikat Permodalan Kebangsaan Berhad, and Habib Bank Limited of Pakistan. In 1991, the Bank embarked on a capital restructuring resulting in the emergence of Affin Holdings Berhad as its largest shareholder in 1992. It later changed its name to Perwira Affin Bank Berhad.
BSN Commercial Bank was incorporated in Malaysia on 16 July 1975 under the name of Bank Buruh (Malaysia) Berhad. It changed its name to BSN Commercial Bank after it was acquired by Bank Simpanan Nasional (BSN) from bankrupt Central Co-operative Bank (CCB) on 11 March 1995.
Alliance Bank
Alliance Financial Group (formerly known as Alliance Banking Group) was founded in early 2001 through a consolidation of 7 financial institutions, in which Multi Purpose Bank Berhad anchored the merger. Besides Multi-Purpose Bank Bhd, the other institutions were International Bank Malaysia Bhd, Bolton Finance Bhd, Bumiputra Merchant Bankers Bhd, Sabah Bank Bhd, Sabah Finance Bhd and Amanah Merchant Bank Bhd.
Multi Purpose Bank first commenced operations in 1958 as Banque de L'indochine, and later changed its name to Banque Indosuez in 1975. In 1982, Banque Indosuez was incorporated into the Malaysian French Bank Berhad. With the corporate restructuring resulting in a majority stake in the bank by Multi-Purpose Capital Holdings Berhad, it was renamed as Multi-Purpose Bank in 1996.
Sabah Bank was incorporated by the State Government of Sabah on 9 August 1977 under the name of Bank Pembangunan Sabah Berhad, as a public limited company under the Companies Act, 1965.
==
Banking Groups announced by Bank Negara
1.Malayan Banking Bhd (MayBank) :
Mayban Finance Bhd, Aseambankers Malaysia Bhd, PhileoAllied Bank Bhd, Pacific Bank Bhd, Sime Finance Bhd and Kewangan Bersatu Bhd
2. The Bumiputra – Commerce Bank Bhd
Bumiputra-Commerce Finance Bhd and Commerce International Merchant Bankers Bhd
3. RHB Bank Bhd
RHB Sakura Merchant Bankers Bhd, Delta Finance Bhd and Interfinance Bhd
4. Public Bank
Public Bank Bhd, Public Finance Bhd, Hock Hua Bank Bhd, Advance Finance Bhd and Sime Merchant Bankers Bhd
5. The Arab Malaysian Bank Bhd (AMMB)
Arab Malaysian Finance Bhd, Arab Malaysian Merchant Bank Bhd, Bank Utama Malaysia Bhd and Utama Merchant Bankers Bhd
6. Hong Leong Bank Bhd
Hong Leong Finance Bhd, Wah Tat Bank Bhd and Credit Corporation Malaysia Bhd
7. Perwira Affin Bank Bhd
Affin Finance Bhd, Perwira Affin Merchant Bankers Bhd, BSN Commercial Bank Bhd, BSN Finance Bhd and BSN Merchant Bank Bhd
8. Multi-Purpose Bank Bhd
International Bank Malaysia Bhd, Sabah Bank Berhad, MBf Finance Bhd, Bolton Finance Bhd, Sabah Finance Bhd, Bumiputra Merchant Bankers Bhd and Amanah Merchant Bank Bhd
9. EON Bank Bhd
EON Finance Bhd, Oriental Bank Bhd, City Finance Bhd, Perkasa Finance Bhd and Malaysian International Merchant Bankers Bhd
10. Southern Bank Bhd
Ban Hin Lee Bank Bhd, Cempaka Finance Bhd, United Merchant Finance Bhd, Perdana Finance Bhd and Perdana Merchant Bankers Bhd
Source: Bank Negara Malaysia
Reference
http://www.maybank2u.com.my/corporate/achievement.shtml
http://www.maybank2u.com.my/corporate/notice3.shtml
http://www.maybank2u.com.my/corporate/press_release/archives/aug30_2.shtml
http://www.cimb.com/index.php?ch=group_ch_acg&pg=group_pg_acg_oh&ac=609&tpt=cimb_group
http://www.rhb.com.my/corporate_profile/history.shtm
http://www.ambg.com.my/ambank_webmedia/file/Our%20History.pdf
http://www.hlb.com.my/ahlb/inv_his.jsp?flag=inv_his
http://www.alliancebank.com.my/ourhistory.html
Tuesday, November 10, 2009
New Islamic banking licences under process
Tuesday November 10, 2009
Keen interest to set up Islamic banking operations in Malaysia
KUALA LUMPUR: The applications for two new Islamic banking licences, which are part of the financial sector liberalisation plan, are still being processed, according to Deputy Finance Minister Datuk Dr Awang Adek Hussin.
“Bank Negara at the moment is processing the applications and making the necessary evaluations. The decision will be made by the central bank in the best interest of the financial sector.
“I was informed that there have been quite a number of applications as well as keen interest from other players to set up Islamic banking operations in the country,” he told a press briefing in conjunction with the Islamic Financial Planning and Wealth Management Conference 2009 (IFPC 2009) here.
In April, the Government announced a financial sector liberalisation plan that included the issuance of licences for seven banking and two takaful players from this year until 2011. It also, among others, eased foreign ownership rules by increasing limits of equity ownership to 70% from 49% for investment banks, Islamic banks, insurance companies and takaful operators.
From left: Financial Planning Association of Malaysia president Wong Boon Choy, Organising Committee IFPC 2009 chairman Datuk Ibrahim Muhammad, Datuk Dr Awang Adek Hussin and Islamic Banking and Finance Institute Malaysia CEO Datuk Dr Adnan Alias at the opening of the IFPC 2009 conference on Monday.
On whether there would be further liberalisation in the financial sector, Awang Adek said it would be done in stages and more would come over time.
“When the time is right and we think we are ready for the next step, we will take it. I don’t think this is the end of liberalisation,” he said.
He noted that the Islamic banking sector had registered double-digit growth over the past eight
years with an average annual growth rate of 20% in terms of assets.
As at end-June, the share of Islamic banking assets in the banking sector had expanded to 19% from 6.9% in 2000. Given the growing maturity of the local bond market, Awang Adek said it was timely that Malaysia offered its own “brand proposition”.
This was to distinguish foreign currency-denominated bonds and sukuk originating from the country in global capital markets, he said.
He added that Petroliam Nasional Bhd had become the largest issuer of US dollar-denominated bonds and sukuk in Asia ex-Japan with the issue of US$3bil worth of bonds and US$1.5bil of sukuk.
Awang Adek also called on Islamic and conventional advisors, including financial planners, to capitalise on the potential growth of syariah-compliant financial sectors, such as the financing-protection segment, where previously Muslims were not able to participate due to a lack of syariah-compliant products.
The increasing demand for Islamic financial products necessitates financial planners to be equipped with the knowledge of syariah requirements of Islamic finance and such expertise was a potential area for growth, he said.
http://biz.thestar.com.my/news/story.asp?file=/2009/11/10/business/5074249&sec=business
Keen interest to set up Islamic banking operations in Malaysia
KUALA LUMPUR: The applications for two new Islamic banking licences, which are part of the financial sector liberalisation plan, are still being processed, according to Deputy Finance Minister Datuk Dr Awang Adek Hussin.
“Bank Negara at the moment is processing the applications and making the necessary evaluations. The decision will be made by the central bank in the best interest of the financial sector.
“I was informed that there have been quite a number of applications as well as keen interest from other players to set up Islamic banking operations in the country,” he told a press briefing in conjunction with the Islamic Financial Planning and Wealth Management Conference 2009 (IFPC 2009) here.
In April, the Government announced a financial sector liberalisation plan that included the issuance of licences for seven banking and two takaful players from this year until 2011. It also, among others, eased foreign ownership rules by increasing limits of equity ownership to 70% from 49% for investment banks, Islamic banks, insurance companies and takaful operators.
From left: Financial Planning Association of Malaysia president Wong Boon Choy, Organising Committee IFPC 2009 chairman Datuk Ibrahim Muhammad, Datuk Dr Awang Adek Hussin and Islamic Banking and Finance Institute Malaysia CEO Datuk Dr Adnan Alias at the opening of the IFPC 2009 conference on Monday.
On whether there would be further liberalisation in the financial sector, Awang Adek said it would be done in stages and more would come over time.
“When the time is right and we think we are ready for the next step, we will take it. I don’t think this is the end of liberalisation,” he said.
He noted that the Islamic banking sector had registered double-digit growth over the past eight
years with an average annual growth rate of 20% in terms of assets.
As at end-June, the share of Islamic banking assets in the banking sector had expanded to 19% from 6.9% in 2000. Given the growing maturity of the local bond market, Awang Adek said it was timely that Malaysia offered its own “brand proposition”.
This was to distinguish foreign currency-denominated bonds and sukuk originating from the country in global capital markets, he said.
He added that Petroliam Nasional Bhd had become the largest issuer of US dollar-denominated bonds and sukuk in Asia ex-Japan with the issue of US$3bil worth of bonds and US$1.5bil of sukuk.
Awang Adek also called on Islamic and conventional advisors, including financial planners, to capitalise on the potential growth of syariah-compliant financial sectors, such as the financing-protection segment, where previously Muslims were not able to participate due to a lack of syariah-compliant products.
The increasing demand for Islamic financial products necessitates financial planners to be equipped with the knowledge of syariah requirements of Islamic finance and such expertise was a potential area for growth, he said.
http://biz.thestar.com.my/news/story.asp?file=/2009/11/10/business/5074249&sec=business
Monday, August 17, 2009
Asian banks sought for deals
Monday August 17, 2009
PETALING JAYA: In the aftermath of the global financial crisis, Asian banks are increasingly being sought after for deal-making and capital raising.
“The financial crisis has been an eye-opener,” said RHB Investment Bank chief executive officer Chay Wai Leong.
“International liquidity has been very tight and in recent large fund raising exercises, domestic liquidity had played a crucial role.”
Many things that were literally unheard of in the past are happening:
·Asian banks going on international roadshows for local clients; and
·Increasing number of requests to participate in bilateral and syndication loans.
“The investment banking community reacts very quickly,” Chay told StarBiz.
Seeing the successful capital raising and backstopping in recent rights issues, global banks now appear to have “more respect” for local banking names.
“We know where the distribution is,” said Chay.
“Asian liquidity is very strong and is likely to play a big part in the upcoming initial public offering of the Asian life unit of American International Group Inc.”
The recent oversubscription to the substantial rights issues of Malayan Banking Bhd (RM5bil), TM International Bhd (RM5.25bil) and DBS Bank (S$2.8bil) indicates the power of domestic liquidity and the dynamic role of local banks.
“In the past, it could not be done,’’ said Chay. “That has opened the eyes of a lot of people that local banks are capable of handling huge deals and that has become a lasting impression.’’
“We are being invited to do deals beyond Malaysian shores,” said Maybank Investment Bank CEO Mohammed Rashdan Yusof.
“We are also getting requests from foreign companies outside of Asean.”
Previously the domain of prominent global names, the deal-making and banking markets are now increasingly being opened to Asian banks that are now big names themselves.
“There is a lot of lending from the banking market as capital markets are still tight,” said Rashdan, adding that requests for funding involved infrastructure, utilities and property development in the region.
Pointing to a renewed focus on Islamic capital markets, Rashdan said a funding mix of syndication loans as bridgers during the construction period and bonds in the form of Islamic finance were also becoming popular.
Chay sees the potential for more bond deals, pointing to the resurgence in the ringgit bond and sukuk markets. RHB had completed a roadshow in Kuwait, Qatar and Saudi Arabia where interest in the Malaysian sukuk market was still strong.
Global offerings
In terms of global offerings, Asian banks are growing in prominence. “The Asian bid is getting much larger in proportion to the global order book especially for strong Asian credits,’’ said Lee Kok Kwan, deputy CEO and group treasurer of CIMB Bhd.
CIMB has just brought to market Petroliam Nasional Bhd’s global US dollar offering of five-year sukuk and 10-year bonds for which issuance was upsized to US$4.5bil, representing the largest issuance to date out of South East Asia in 2009.
“The Asian bid of the order book was particularly strong and respresents a solid turnaround for future issuances of Malaysian credits,’’ said Lee. “It is also a clear example of the coming of age of some Asian banks to competently bring global issues to the market for corporate clients in terms of syndication, distribution and execution.’’
Moreover, the far-reaching impact of the Asian recovery, post-crisis, is not just on investment but also commercial banking.
“Coming out of this recession, the East has piled up savings to invest in its own economies,” Lee said.
Upcoming trends, according to Lee, include the faster rate of recovery for Asia and the BRIC (Brazil, Russia, India and China) countries; higher intra-Asian investments coupled with a potentially more inward-looking region, which bodes well for further expansion in infrastructure development.
Hard infrastructure is likely to be the emphasis in India and Indonesia, while China, having built much of its hard infrastructure, is focusing on its soft infrastructure such as rural development.
Due to sheer proximity, Asian banks are projected to be the major beneficiaries especially in terms of their retail and mortgage businesses, regional activities and movements.
“Credit decisions can be made faster by Asian banks that understand local companies better,” said Lee, adding that moves by Asian countries to develop their own currencies, loans and deposits as well as capital market systems would benefit local banks.
“This will reduce funding costs,” Lee explained, adding that local banks had a higher competitive advantage in their ability to raise local currency deposits.
“Once the push to domestic economies gathers steam, the full array of banking activities from retail to corporate will rise,” he said.
This will enable Asian banks to realise their vision of becoming regional champions.
So far, it appears that vast opportunities await Asian banks in terms of further business development. In terms of mergers and acquisitions (M&As), it may be a different ball game.
“If we take Asia to include Australia, the recent acquisition of the Asian operations of the Royal Bank of Scotland by the Australia and New Zealand banking group indicates that a fairly strong Australian bank has achieved its target of becoming a super regional bank,” said Rashdan.
Otherwise, M&As remain challenging for South East Asian banks, some of which had just completed large acquisitions as in the case of CIMB and Maybank.
Rashdan suggested a Chinese or Indian bank could embark on an acquisition, which may not be easy to execute, as seen in the integration and cultural issues faced by Nomura Holdings when it acquired the Asian operations of Lehman Brothers.
http://biz.thestar.com.my/news/story.asp?file=/2009/8/17/business/4530770&sec=business
Banks ready to implement new framework by January 2010
Monday August 17, 2009
On track for advanced Basel II approaches
PETALING JAYA: The country’s banks are on track to adopt advanced Basel II approaches by January next year and a delay in the implementation is not expected.
John Lee, KPMG head of Asia Pacific financial risk management and head of Malaysia financial services, said many banks were at various degrees of Basel II projects, covering enhancements of risk management governance and framework, and ongoing improvements in risk assessment, measurement and mitigation.
“Basel II is a pivotal milestone to achieve better risk and capital management,” he said.
Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz had said Malaysian banks were well positioned for the advanced implementation of Basel II in 2010.
Most banks, which have chosen to comply with the less sophisticated approaches of Basel II Pillar 1, which focuses on minimum capital requirements, are already in compliance with Basel II since January 2008.
However, some of the country’s banks such as Malayan Banking Bhd, OCBC Bank (M) Bhd and United Overseas Bank (M) Bhd have chosen to skip the adoption of the standardised approach and move towards the advanced approaches such as the internal rating based (IRB) approach for credit risk, where compliance is by January 2010.
Lee said that besides the Basel II Pillar 1 requirements, all banks were also working towards complying with Basel II Pillar 2 which focused on banks’ internal capital management and Pillar 3 on disclosure of risk management and market discipline, where the deadline indicated by Bank Negara was the beginning of 2010 (for banks which have adopted the standardised approach).
“These banks are certainly occupied in preparing and ensuring that various critical milestones are fulfilled to meet the impending timeline,” he added.
Malayan Banking Bhd project director (Basel II) Ariffin Morad said the group had obtained Bank Negara’s conditional approval to adopt the IRB approach in 2010.
“Bank Negara is in the process of reviewing our preparations and we expect final IRB certification before we implement,” he said.
According to Ariffin, Maybank has also made preparations for Pillar 2 and Pillar 3, in line with regulatory requirements.
“We have submitted a high-level Internal Capital Adequacy Assessment Process framework to Bank Negara in 2008.
“We will implement IRB disclosure requirements as set out by Bank Negara for Pillar 3,” he said.
OCBC Bank (M) Bhd and OCBC Al-Amin Bank Bhd plan to be ready to adopt Basel II IRB for credit risk by the stipulated deadline pending the release of the finalised IRB rules by the central bank.
OCBC Bank country chief risk officer Choo Yee Kwan said: “We are currently on track to comply with Bank Negara’s IRB rules by January 2010.”
Pillar 2 for credit risk would follow a year after implementation of Pillar 1, he added.
“Although Pillar 3 for the credit risk timeline in the country has yet to be determined, OCBC, at group level, has included Pillar 3 market disclosure in its 2008 annual report,” he said.
United Overseas Bank (M) Bhd director and chief executive officer Chan Kok Seong said the bank was also currently preparing the necessary processes to implement the IRB approach for credit risk.
“Where reporting to the local authority is concerned, we still report under the Basel I regime and will need Bank Negara’s certification to migrate to the advanced approaches for credit risk.
“We are ready to adopt Basel II from 2010 onwards, subject to Bank Negara’s validation,” he said.
KPMG’s Lee noted that locally incorporated foreign banks, such as OCBC and UOB, had the necessary infrastructure to comply with the advanced approaches of Basel II as their parents, which are international banks, would have already adopted the approaches in other countries.
“These banks have a slight advantage because of this. However, they will need to work on localising the approaches according to Bank Negara’s requirements,” he said.
Meanwhile, Alliance Bank Malaysia Bhd, which had adopted the Basel II standardised approach in 2008, is building capabilities towards the more advanced Basel II IRB approach, which enables rating models to be developed to enhance its business decisions.
Group chief executive officer Datuk Bridget Lai said: “We are continuously enhancing our risk management capabilities and making preparations for the more sophisticated Basel II approaches.”
Some of the key challenges banks cited in adopting Basel II include the collection of data history for the development of IRB models, availability of skilled resources and sufficient investment in IT infrastructure to implement Basel II.
Nevertheless, Basel II, with its linkages between risk and capital, is expected to enhance the resilience of domestic banks.
http://biz.thestar.com.my/news/story.asp?file=/2009/8/17/business/4525770&sec=business
On track for advanced Basel II approaches
PETALING JAYA: The country’s banks are on track to adopt advanced Basel II approaches by January next year and a delay in the implementation is not expected.
John Lee, KPMG head of Asia Pacific financial risk management and head of Malaysia financial services, said many banks were at various degrees of Basel II projects, covering enhancements of risk management governance and framework, and ongoing improvements in risk assessment, measurement and mitigation.
“Basel II is a pivotal milestone to achieve better risk and capital management,” he said.
Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz had said Malaysian banks were well positioned for the advanced implementation of Basel II in 2010.
Most banks, which have chosen to comply with the less sophisticated approaches of Basel II Pillar 1, which focuses on minimum capital requirements, are already in compliance with Basel II since January 2008.
However, some of the country’s banks such as Malayan Banking Bhd, OCBC Bank (M) Bhd and United Overseas Bank (M) Bhd have chosen to skip the adoption of the standardised approach and move towards the advanced approaches such as the internal rating based (IRB) approach for credit risk, where compliance is by January 2010.
Lee said that besides the Basel II Pillar 1 requirements, all banks were also working towards complying with Basel II Pillar 2 which focused on banks’ internal capital management and Pillar 3 on disclosure of risk management and market discipline, where the deadline indicated by Bank Negara was the beginning of 2010 (for banks which have adopted the standardised approach).
“These banks are certainly occupied in preparing and ensuring that various critical milestones are fulfilled to meet the impending timeline,” he added.
Malayan Banking Bhd project director (Basel II) Ariffin Morad said the group had obtained Bank Negara’s conditional approval to adopt the IRB approach in 2010.
“Bank Negara is in the process of reviewing our preparations and we expect final IRB certification before we implement,” he said.
According to Ariffin, Maybank has also made preparations for Pillar 2 and Pillar 3, in line with regulatory requirements.
“We have submitted a high-level Internal Capital Adequacy Assessment Process framework to Bank Negara in 2008.
“We will implement IRB disclosure requirements as set out by Bank Negara for Pillar 3,” he said.
OCBC Bank (M) Bhd and OCBC Al-Amin Bank Bhd plan to be ready to adopt Basel II IRB for credit risk by the stipulated deadline pending the release of the finalised IRB rules by the central bank.
OCBC Bank country chief risk officer Choo Yee Kwan said: “We are currently on track to comply with Bank Negara’s IRB rules by January 2010.”
Pillar 2 for credit risk would follow a year after implementation of Pillar 1, he added.
“Although Pillar 3 for the credit risk timeline in the country has yet to be determined, OCBC, at group level, has included Pillar 3 market disclosure in its 2008 annual report,” he said.
United Overseas Bank (M) Bhd director and chief executive officer Chan Kok Seong said the bank was also currently preparing the necessary processes to implement the IRB approach for credit risk.
“Where reporting to the local authority is concerned, we still report under the Basel I regime and will need Bank Negara’s certification to migrate to the advanced approaches for credit risk.
“We are ready to adopt Basel II from 2010 onwards, subject to Bank Negara’s validation,” he said.
KPMG’s Lee noted that locally incorporated foreign banks, such as OCBC and UOB, had the necessary infrastructure to comply with the advanced approaches of Basel II as their parents, which are international banks, would have already adopted the approaches in other countries.
“These banks have a slight advantage because of this. However, they will need to work on localising the approaches according to Bank Negara’s requirements,” he said.
Meanwhile, Alliance Bank Malaysia Bhd, which had adopted the Basel II standardised approach in 2008, is building capabilities towards the more advanced Basel II IRB approach, which enables rating models to be developed to enhance its business decisions.
Group chief executive officer Datuk Bridget Lai said: “We are continuously enhancing our risk management capabilities and making preparations for the more sophisticated Basel II approaches.”
Some of the key challenges banks cited in adopting Basel II include the collection of data history for the development of IRB models, availability of skilled resources and sufficient investment in IT infrastructure to implement Basel II.
Nevertheless, Basel II, with its linkages between risk and capital, is expected to enhance the resilience of domestic banks.
http://biz.thestar.com.my/news/story.asp?file=/2009/8/17/business/4525770&sec=business
Monday, July 13, 2009
RHB Bank continues to transform
Monday July 13, 2009
It wants to be well prepared for imminent economic recovery
PETALING JAYA: RHB Bank Bhd expects to sustain profitability and asset growth this year while raising the bar on service quality as the group continues to reap the benefits of its ongoing transformation exercise amid a challenging economic environment, said the bank’s new group managing director Datuk Tajuddin Atan.
Tajuddin aims to maintain the banking group’s record net profit achieved in financial year ended Dec 31, 2008, which exceeded RM1bil for the first time.
“To sustain at this level would be fantastic in view of the current challenging environment,” he said. “In that way, we would surely make heads turn.’’
He said his immediate priorities were to continue with the group’s five-year transformation programme which started in 2007.
“It is crucial to position ourselves well in order to be prepared for the imminient economic recovery,” Tajuddin told StarBiz.
“RHB already has a strong management team. As a mid-sized bank, it is agile and can respond fast to changes. It is matter of improving efficiency and further reducing costs.”
The various strategic business units have already been restructured and buzzing with activities based on their areas of focus, he said, adding that RHB has passed its first phase of improved efficiency and was now into its second phase of sustainability and higher performance.
Tajuddin succeeded Michael J. Barrett, the former group managing director, on July 1.
He was previously CEO and president of Bank Pembangunan Malaysia Bhd.
Prior to that, Tajuddin was general manager (CEO position) at Bank Simpanan Nasional from October 2004 to November 2007.
He spent his early years at the former Bank Bumiputra, where he served for 16 years, holding various positions such as group treasurer and assistant general manager (treasury) of its New York branch.
RHB plans to strengthen Islamic banking in both aspects of retail and investment banking, Tajuddin said, adding that his main priorities were to ensure that assets and liabilities were well managed, with loans growth targeted at 5% to 7% this year.
“If the business is fundamentally sound, we would look to restructure credit facilities to match cashflows affected by the difficult external environment.
“We have strengthened a clear credit framework and strengthened our collection as well as early tracking mechanism,” he said.
Tajuddin is also stressing on the need to set a high level of service quality at RHB.
“Customers nowadays are very choosy. It is not just about offering a whole range of products or services.
“Competition is the buzzword now. We blink and we would lose potential customers. If someone else blinks, we would get their customers. Not doing anything in the current environment is bad,” he said.
Tajuddin said he used the bank’s products and services himself and sometimes turned up unannounced at some of the bank’s branches as part of efforts to improve the quality of service.
“I need to experience it first-hand. If I find it difficult to use, how would our customers feel?” he asked.
RHB has been looking seriously into customer complaints and will embark on a re-training programme for over 3,000 staff in the areas of service and credit quality.
“We are a recognisable brand, with over 180 branches and a large customer base. But all this means nothing if the service quality is not improved,” he said.
Tajuddin also intends to further improve staff welfare by organising annual dinners, family and sports days.
“We want to get the families involved as we understand that a lot of family time has been sacrificed by our staff,” he said.
http://thestar.com.my/news/story.asp?file=/2009/7/13/business/4300440&sec=business
It wants to be well prepared for imminent economic recovery
PETALING JAYA: RHB Bank Bhd expects to sustain profitability and asset growth this year while raising the bar on service quality as the group continues to reap the benefits of its ongoing transformation exercise amid a challenging economic environment, said the bank’s new group managing director Datuk Tajuddin Atan.
Tajuddin aims to maintain the banking group’s record net profit achieved in financial year ended Dec 31, 2008, which exceeded RM1bil for the first time.
“To sustain at this level would be fantastic in view of the current challenging environment,” he said. “In that way, we would surely make heads turn.’’
He said his immediate priorities were to continue with the group’s five-year transformation programme which started in 2007.
“It is crucial to position ourselves well in order to be prepared for the imminient economic recovery,” Tajuddin told StarBiz.
“RHB already has a strong management team. As a mid-sized bank, it is agile and can respond fast to changes. It is matter of improving efficiency and further reducing costs.”
The various strategic business units have already been restructured and buzzing with activities based on their areas of focus, he said, adding that RHB has passed its first phase of improved efficiency and was now into its second phase of sustainability and higher performance.
Tajuddin succeeded Michael J. Barrett, the former group managing director, on July 1.
He was previously CEO and president of Bank Pembangunan Malaysia Bhd.
Prior to that, Tajuddin was general manager (CEO position) at Bank Simpanan Nasional from October 2004 to November 2007.
He spent his early years at the former Bank Bumiputra, where he served for 16 years, holding various positions such as group treasurer and assistant general manager (treasury) of its New York branch.
RHB plans to strengthen Islamic banking in both aspects of retail and investment banking, Tajuddin said, adding that his main priorities were to ensure that assets and liabilities were well managed, with loans growth targeted at 5% to 7% this year.
“If the business is fundamentally sound, we would look to restructure credit facilities to match cashflows affected by the difficult external environment.
“We have strengthened a clear credit framework and strengthened our collection as well as early tracking mechanism,” he said.
Tajuddin is also stressing on the need to set a high level of service quality at RHB.
“Customers nowadays are very choosy. It is not just about offering a whole range of products or services.
“Competition is the buzzword now. We blink and we would lose potential customers. If someone else blinks, we would get their customers. Not doing anything in the current environment is bad,” he said.
Tajuddin said he used the bank’s products and services himself and sometimes turned up unannounced at some of the bank’s branches as part of efforts to improve the quality of service.
“I need to experience it first-hand. If I find it difficult to use, how would our customers feel?” he asked.
RHB has been looking seriously into customer complaints and will embark on a re-training programme for over 3,000 staff in the areas of service and credit quality.
“We are a recognisable brand, with over 180 branches and a large customer base. But all this means nothing if the service quality is not improved,” he said.
Tajuddin also intends to further improve staff welfare by organising annual dinners, family and sports days.
“We want to get the families involved as we understand that a lot of family time has been sacrificed by our staff,” he said.
http://thestar.com.my/news/story.asp?file=/2009/7/13/business/4300440&sec=business
Friday, June 26, 2009
EON Cap plans RM1bil fund-raising exercise
Friday June 26, 2009
EON Cap plans RM1bil fund-raising exercise
It hopes to raise at least RM500mil from the Tier 1 capital programme
KUALA LUMPUR: EON Capital Bhd has submitted an application to raise RM1bil in Tier 1 capital, barely a week after Bank Negara rejected the group’s plan to sell new warrants to shareholder Primus Pacific Partners LLC for RM29.5mil.
“We hope to raise at least RM500mil from the RM1bil innovative Tier 1 capital programme,” chairman Tan Sri Syed Anwar Jamalullail told reporters after the group’s AGM yesterday.
He said the proposal on the fund-raising programme was submitted to the Securities Commission yesterday.
EON Cap director Rodney Ward said the group’s current core capital ratio would strengthen to just below 11% from the current 9.7% with the additional RM500mil in fresh funds from the upcoming issue.
“We don’t want the bank to be over-capitalised,” Syed Anwar said when asked why the bank planned to raise just half the proposed amount.
Ward explained that the innovative Tier 1 capital raising programme was a special investment instrument designed to appeal to long-term investors. EON Cap has appointed CIMB Bank Bhd and its own unit MIMB Investment Bank Bhd to develop the instrument.
Recently, some analysts opined that EON Cap has ample room to raise as much as RM1.5bil in Tier 1 capital to shore up its working capital.
Ward said the bank would also continue to look at other capital raising options, but was “not under the gun to do so” at this moment.
EON Cap’s capital position was put under the microscope after Bank Negara rejected the proposed sale of new warrants to Primus last week without disclosing the reasons behind the decision.
Syed Anwar said that the amount to be raised from the warrants sale was small, and would only improve the bank’s core capital ratio by 0.15% if the issue were to go through.
Assuming the warrants were fully converted into EON Cap shares, Primus’ stake would increase to 26.4% from 20.2% currently.
Primus was reported to be appealing against the decision by Bank Negara.
On another note, Syed Anwar said the group had narrowed the candidates to lead the bank following the retirement of former chief executive officer Albert Lau in April.
“We hope to appoint one before the end of the year,” he said.
Syed Anwar said consumer loans at the bank grew at a steady rate of 6% so far this year, although corporate lending activities showed a contraction due to the sharp decline in trade finance.
The group’s asset quality showed some deterioration in the first quarter, mainly due to “two loans” that were being restructured.
“In the current quarter, asset quality has improved, while at the same time we have also expanded our loan recovery unit,” he said.
http://biz.thestar.com.my/news/story.asp?file=/2009/6/26/business/4196919&sec=business
EON Cap plans RM1bil fund-raising exercise
It hopes to raise at least RM500mil from the Tier 1 capital programme
KUALA LUMPUR: EON Capital Bhd has submitted an application to raise RM1bil in Tier 1 capital, barely a week after Bank Negara rejected the group’s plan to sell new warrants to shareholder Primus Pacific Partners LLC for RM29.5mil.
“We hope to raise at least RM500mil from the RM1bil innovative Tier 1 capital programme,” chairman Tan Sri Syed Anwar Jamalullail told reporters after the group’s AGM yesterday.
He said the proposal on the fund-raising programme was submitted to the Securities Commission yesterday.
EON Cap director Rodney Ward said the group’s current core capital ratio would strengthen to just below 11% from the current 9.7% with the additional RM500mil in fresh funds from the upcoming issue.
“We don’t want the bank to be over-capitalised,” Syed Anwar said when asked why the bank planned to raise just half the proposed amount.
Ward explained that the innovative Tier 1 capital raising programme was a special investment instrument designed to appeal to long-term investors. EON Cap has appointed CIMB Bank Bhd and its own unit MIMB Investment Bank Bhd to develop the instrument.
Recently, some analysts opined that EON Cap has ample room to raise as much as RM1.5bil in Tier 1 capital to shore up its working capital.
Ward said the bank would also continue to look at other capital raising options, but was “not under the gun to do so” at this moment.
EON Cap’s capital position was put under the microscope after Bank Negara rejected the proposed sale of new warrants to Primus last week without disclosing the reasons behind the decision.
Syed Anwar said that the amount to be raised from the warrants sale was small, and would only improve the bank’s core capital ratio by 0.15% if the issue were to go through.
Assuming the warrants were fully converted into EON Cap shares, Primus’ stake would increase to 26.4% from 20.2% currently.
Primus was reported to be appealing against the decision by Bank Negara.
On another note, Syed Anwar said the group had narrowed the candidates to lead the bank following the retirement of former chief executive officer Albert Lau in April.
“We hope to appoint one before the end of the year,” he said.
Syed Anwar said consumer loans at the bank grew at a steady rate of 6% so far this year, although corporate lending activities showed a contraction due to the sharp decline in trade finance.
The group’s asset quality showed some deterioration in the first quarter, mainly due to “two loans” that were being restructured.
“In the current quarter, asset quality has improved, while at the same time we have also expanded our loan recovery unit,” he said.
http://biz.thestar.com.my/news/story.asp?file=/2009/6/26/business/4196919&sec=business
RHB Cap to expand in Vietnam
Friday June 19, 2009
RHB Cap to expand in Vietnam
It has set its sights on a full banking licence there
KUALA LUMPUR: RHB Capital Bhd (RHB Cap), the fourth largest financial services group in the country, plans to expand its presence in Vietnam eventually, through a full banking licence.
The group currently has a 49% stake in retail brokerage Vietnam Securities Corp which it acquired in November last year.
Outgoing group managing director Michael Barrett told a press briefing after the group’s AGM yesterday that for now, RHB Bank Bhd had representative offices in Ho Chi Minh City and Hanoi.
He added that it was the long-term intention of the group to obtain a full banking licence in the country. Barrett said this would come “in due course” when the banking and financial landscape became more open.
He also did not rule out the possibility of raising RHB Cap’s stake in Vietnam Securities. Barrett said current regulations did not allow the group to acquire a majority stake in a Vietnamese financial firm.
“We’re looking at taking a local retail brokerage that has the capabilities to do investment banking and corporate finance to expand our initiatives,” Barrett said, adding that the group was also interested in expanding its presence in the South-East Asian region.
Meanwhile, he expects loans growth of between 5% and 7% for the current financial year as “significant signs of recovery” began to show in the fourth quarter.
He said home loans, personal financing and credit cards were areas in which the group saw growth but motor vehicle loans and loans to small and medium-scale enterprises were down due to the more challenging economic environment.
He said non-performing loans (NPLs) increased to 2.57% in the first quarter but had come down recently. For the financial year ended Dec 31, 2008, NPLs were lower at 2.24% against 2.43% 2007 while loan-loss coverage rose to 90% from 71% previously.
Barrett said although NPLs were higher in the first quarter, the absolute number had not gone up. He said this was largely due to the lower loan base in the quarter.
http://thestar.com.my/news/story.asp?file=/2009/6/19/business/4148210&sec=business
RHB Cap to expand in Vietnam
It has set its sights on a full banking licence there
KUALA LUMPUR: RHB Capital Bhd (RHB Cap), the fourth largest financial services group in the country, plans to expand its presence in Vietnam eventually, through a full banking licence.
The group currently has a 49% stake in retail brokerage Vietnam Securities Corp which it acquired in November last year.
Outgoing group managing director Michael Barrett told a press briefing after the group’s AGM yesterday that for now, RHB Bank Bhd had representative offices in Ho Chi Minh City and Hanoi.
He added that it was the long-term intention of the group to obtain a full banking licence in the country. Barrett said this would come “in due course” when the banking and financial landscape became more open.
He also did not rule out the possibility of raising RHB Cap’s stake in Vietnam Securities. Barrett said current regulations did not allow the group to acquire a majority stake in a Vietnamese financial firm.
“We’re looking at taking a local retail brokerage that has the capabilities to do investment banking and corporate finance to expand our initiatives,” Barrett said, adding that the group was also interested in expanding its presence in the South-East Asian region.
Meanwhile, he expects loans growth of between 5% and 7% for the current financial year as “significant signs of recovery” began to show in the fourth quarter.
He said home loans, personal financing and credit cards were areas in which the group saw growth but motor vehicle loans and loans to small and medium-scale enterprises were down due to the more challenging economic environment.
He said non-performing loans (NPLs) increased to 2.57% in the first quarter but had come down recently. For the financial year ended Dec 31, 2008, NPLs were lower at 2.24% against 2.43% 2007 while loan-loss coverage rose to 90% from 71% previously.
Barrett said although NPLs were higher in the first quarter, the absolute number had not gone up. He said this was largely due to the lower loan base in the quarter.
http://thestar.com.my/news/story.asp?file=/2009/6/19/business/4148210&sec=business
Monday, June 1, 2009
Growing Pains - Islamic finance is well positioned but faces governance challenges
C F A M A G A Z I N E M A Y – J U N E 2 0 0 9
KEY POINTS
• Islamic banks were largely spared the effects of the toxic assets at the heart of the global credit crunch.
• To take advantage of opportunities, Islamic financial institutions need to improve governance practices.
• Lack of standardization poses a challenge for practitioners, regulators, and investors.
Islamic banks, which shy away from leverage, have been largely buffered from the toxic debts of the credit crunch, now estimated by the International Monetary Fund to reach as high as US$4 trillion. Unlike mainstream houses, Islamic institutions are still growing. Their financial assets are estimated to be worth US$750–US$800 billion, having grown at a compound
annual rate of 20–30 percent over the past decade, according to a September 2008 research report by Morgan Stanley. This figure is widely expected to exceed US$1 trillion by 2010, and some consultants believe it could go as high as $2 trillion.
“Because of the global credit crunch, the potential for Islamic banking is now brighter than the potential of the conventional system,” explains Wohid Islam, legal counsel for the Qatar Investment Authority, the sovereign wealth fund of the state of Qatar.
Islamic finance is governed by Shariah law, which prohibits usury, making it difficult to offer debt, interest, or leveraged products to the market. Shariah-compliant institutions are also prohibited from making investments in companies involved in tobacco, weapons, gambling, alcohol, or porkrelated products. Shariah-compliant supervisory boards must approve each product, adding an extra layer of governance to the mix.
Growth in the industry has come largely from debt-based products. Sukuks are Islamic bonds that offer coupon profits instead of compound interest. They are the fastest growing area of the market.
Challenges to Growth
And yet, for the industry to reach its potential, there are growing pains to resolve. In 2007, Sheikh Muhammad Taqi Usmani, chairman of the Accounting and Auditing Organization for Islamic Financial Institutions (AAOFI) said that 85 percent of all Gulf Islamic bonds do not fully comply with Islamic laws. Hedge funds and structured products have also caused controversy, with critics saying that some Shariah scholars, who sit on the boards of multiple financial institutions because of rising demand, are often too well paid or too unfamiliar with products to make fair decisions. Very few of the Shariah scholars have financial backgrounds, and most have had to learn about the industry as they went along.
“Islamic financial products are subject to the same regulation as any other financial product, whether they are offered in Europe, Asia, Africa, or anywhere else.”
One hedge fund of funds manager, after being given approval to develop a product by his own Shariah board, was startled to discover that other scholars at different institutions would not allow the product to be distributed. “It’s ridiculous to go ahead with something which takes up time, energy, and money only to then find out that there’s no consensus and you can’t launch the thing anyway,” he complains. “There needs to be some sort of coherent approach, we have to be able to trust our advice.”
Regulators are trying to deal with the issue. “Islamic financial products are subject to the same regulation as any other financial product, whether they are offered in Europe, Asia, Africa, or anywhere else,” says Shaykh Yusuf Talal DeLorenzo, a leading Islamic scholar and adviser to the Dow Jones Islamic Market Indices. “Owing to the special nature of Islamic finance products, however, some jurisdictions have established an extra level of supervision. Such measures are welcomed by the industry.”
But even this is proving tricky. Malaysia has tackled the issue by developing its own Shariah board at a regulatory level to provide centralized oversight. But the Gulf Cooperation Council (GCC) and stricter Muslim nations feel Malaysia’s approach to Shariah compliance is far too liberal and relaxed.
“Investors here are not willing to invest in the products that are approved by Shariah boards in Malaysia,” explains Mohammad Shoaib, CFA, chief executive of Al Meezan Investment Management in Pakistan.
In most of the GCC, Shariah governance is devolved to the bank level. “It is almost privatized, and as a result there is quite a lot of variation in systems of governance. You don’t get standardization, and there are issues about the appointment of Shariah scholars and what qualifications they have and how many boards they sit on,” explains Rodney Wilson, professor of Islamic finance at Durham University and visiting professor at Qatar University. Wilson is also chair of the academic committee of the Institute of Islamic Banking and Insurance in the United Kingdom. “There is one scholar who sits on the boards of 55 institutions,” he points out. “We have published guidelines that highlight some of these issues, not least of which is confidential access to information.”
Unlike Malaysia, Dubai does not believe in a centralized approach to governance and regulation. “We don’t think we are qualified to be Shariah arbitrators,” insists Nik Thani, executive director of Islamic finance at the Dubai International Finance Centre (DIFC). He believes that Malaysia has limited its options by centralizing. “They have an excellent Islamic finance market, and it’s very efficient. But the backbone of their structure is not something that is recognised outside of Malaysia. Shariah law is like common law. It is dynamic, and it evolves. It’s difficult for a government to shift its position. We leave it to market players to develop products that will appeal to their clients.” Thani also points out that unlike other religions, Islam has no central authority. “We need a more collaborative approach between the various regulators,” he says.
Standardization
For some observers, standardization is a difficult concept. “From my perspective, you stifle development by having total standardization. If you had a universal Shariah committee, there would be more certainty to the market, but the downside would be a lack of innovation,” says Richard Thomas, managing director of GSH UK, the UK investment arm of a Kuwaiti-based real estate firm. He believes that a large amount of standardization has already been put in place. “What is universally agreed upon is far greater than areas where there is some conflict. A lot of the controversy has come up from the way that different organizations have exploited the industry and encouraged inappropriate uses for instruments like sukuks.” Others argue that standardization wouldn’t be necessary if international banks hadn’t jumped on the bandwagon and come into Muslim countries with the idea of paying lip service to Islamic
banking by pushing every esoteric structured product through the system. They believe that Islamic banks should continue to do what they are good at— follow classic banking models, with
financing to come from deposits. Then there are those who favor practical standards. “You don’t have to standardize products, but there’s nothing wrong with standardizing procedures,”
says Wilson. “There are different principles of Islamic jurisprudence, but there’s no reason why principles can’t be done in a way that gives confidence to the market.”
ISLAMIC BANKINGCONVENTIONAL BANKING
1. Money is not a commodity, good, or service. It has no price of its own and cannot be used in lending or borrowing for a price (i.e., interest).
2. Money is priced based on the concept of time value of money/opportunity cost, in
addition to the level of risk inherent in a given transaction.
1. Financing activities must be backed by tangible assets.
2. Financing activities are mostly carried out back to back without being asset backed.
1. Money (a stream of cash flow) cannot be exchanged against money (another stream of cash flow) for a price.Exchanging different streams of cash flow in terms of interest paid/received or timing of payment/collection is a common practice.
2. Transactions and activities that involve an element of uncertainty (speculation) regarding outcome and/or timing of execution or delivery are not allowed.Uncertainty and risk management are part and parcel of conventional banking activities
1. Penalties on late payments are prohibited. If penalties are levied, they must be re-channelled to charities.
2. Fees are typically charged for late payments.
1. Transactions and activities that involve engagement with unlawful business sectors, such as gambling and alcohol, are not allowed.
2. Besides money laundering and the financing of criminal activities, how customers use borrowed funds is typically unrestricted.
Source: Al Meezan Guide to Islamic Finance, Morgan Stanley Research.
Challenges to Development
Standardization is one of many challenges to future development. Morgan Stanley has identified four other areas of concern. First, the scarcity of Shariah scholars who are well versed in both Islam and finance leads to overburdened Shariah boards and slow approval processes. Second, Shariah compliance leads to greater product complexity, higher skills requirements, and more onerous documentation. Third, because of the unique aspects of Islamic finance and lack of hedging instruments, liquidity makes risk management that much more challenging. Finally, says Morgan Stanley, there is competition from conventional banking. Industry leaders are unfazed. “At the moment, Islamic finance only accounts for 1 percent of the global financial market,” says DIFC’s Thani. “We have done a lot of growing up in the past few years, and we’re conscious of the weaknesses in the system. We’re always addressing those. It’s difficult to set a time for the development of a level playing field [with conventional banking], but I think it will be relatively fast.”
Maha Khan Phillips is a financial journalist based in London.
KEY POINTS
• Islamic banks were largely spared the effects of the toxic assets at the heart of the global credit crunch.
• To take advantage of opportunities, Islamic financial institutions need to improve governance practices.
• Lack of standardization poses a challenge for practitioners, regulators, and investors.
Islamic banks, which shy away from leverage, have been largely buffered from the toxic debts of the credit crunch, now estimated by the International Monetary Fund to reach as high as US$4 trillion. Unlike mainstream houses, Islamic institutions are still growing. Their financial assets are estimated to be worth US$750–US$800 billion, having grown at a compound
annual rate of 20–30 percent over the past decade, according to a September 2008 research report by Morgan Stanley. This figure is widely expected to exceed US$1 trillion by 2010, and some consultants believe it could go as high as $2 trillion.
“Because of the global credit crunch, the potential for Islamic banking is now brighter than the potential of the conventional system,” explains Wohid Islam, legal counsel for the Qatar Investment Authority, the sovereign wealth fund of the state of Qatar.
Islamic finance is governed by Shariah law, which prohibits usury, making it difficult to offer debt, interest, or leveraged products to the market. Shariah-compliant institutions are also prohibited from making investments in companies involved in tobacco, weapons, gambling, alcohol, or porkrelated products. Shariah-compliant supervisory boards must approve each product, adding an extra layer of governance to the mix.
Growth in the industry has come largely from debt-based products. Sukuks are Islamic bonds that offer coupon profits instead of compound interest. They are the fastest growing area of the market.
Challenges to Growth
And yet, for the industry to reach its potential, there are growing pains to resolve. In 2007, Sheikh Muhammad Taqi Usmani, chairman of the Accounting and Auditing Organization for Islamic Financial Institutions (AAOFI) said that 85 percent of all Gulf Islamic bonds do not fully comply with Islamic laws. Hedge funds and structured products have also caused controversy, with critics saying that some Shariah scholars, who sit on the boards of multiple financial institutions because of rising demand, are often too well paid or too unfamiliar with products to make fair decisions. Very few of the Shariah scholars have financial backgrounds, and most have had to learn about the industry as they went along.
“Islamic financial products are subject to the same regulation as any other financial product, whether they are offered in Europe, Asia, Africa, or anywhere else.”
One hedge fund of funds manager, after being given approval to develop a product by his own Shariah board, was startled to discover that other scholars at different institutions would not allow the product to be distributed. “It’s ridiculous to go ahead with something which takes up time, energy, and money only to then find out that there’s no consensus and you can’t launch the thing anyway,” he complains. “There needs to be some sort of coherent approach, we have to be able to trust our advice.”
Regulators are trying to deal with the issue. “Islamic financial products are subject to the same regulation as any other financial product, whether they are offered in Europe, Asia, Africa, or anywhere else,” says Shaykh Yusuf Talal DeLorenzo, a leading Islamic scholar and adviser to the Dow Jones Islamic Market Indices. “Owing to the special nature of Islamic finance products, however, some jurisdictions have established an extra level of supervision. Such measures are welcomed by the industry.”
But even this is proving tricky. Malaysia has tackled the issue by developing its own Shariah board at a regulatory level to provide centralized oversight. But the Gulf Cooperation Council (GCC) and stricter Muslim nations feel Malaysia’s approach to Shariah compliance is far too liberal and relaxed.
“Investors here are not willing to invest in the products that are approved by Shariah boards in Malaysia,” explains Mohammad Shoaib, CFA, chief executive of Al Meezan Investment Management in Pakistan.
In most of the GCC, Shariah governance is devolved to the bank level. “It is almost privatized, and as a result there is quite a lot of variation in systems of governance. You don’t get standardization, and there are issues about the appointment of Shariah scholars and what qualifications they have and how many boards they sit on,” explains Rodney Wilson, professor of Islamic finance at Durham University and visiting professor at Qatar University. Wilson is also chair of the academic committee of the Institute of Islamic Banking and Insurance in the United Kingdom. “There is one scholar who sits on the boards of 55 institutions,” he points out. “We have published guidelines that highlight some of these issues, not least of which is confidential access to information.”
Unlike Malaysia, Dubai does not believe in a centralized approach to governance and regulation. “We don’t think we are qualified to be Shariah arbitrators,” insists Nik Thani, executive director of Islamic finance at the Dubai International Finance Centre (DIFC). He believes that Malaysia has limited its options by centralizing. “They have an excellent Islamic finance market, and it’s very efficient. But the backbone of their structure is not something that is recognised outside of Malaysia. Shariah law is like common law. It is dynamic, and it evolves. It’s difficult for a government to shift its position. We leave it to market players to develop products that will appeal to their clients.” Thani also points out that unlike other religions, Islam has no central authority. “We need a more collaborative approach between the various regulators,” he says.
Standardization
For some observers, standardization is a difficult concept. “From my perspective, you stifle development by having total standardization. If you had a universal Shariah committee, there would be more certainty to the market, but the downside would be a lack of innovation,” says Richard Thomas, managing director of GSH UK, the UK investment arm of a Kuwaiti-based real estate firm. He believes that a large amount of standardization has already been put in place. “What is universally agreed upon is far greater than areas where there is some conflict. A lot of the controversy has come up from the way that different organizations have exploited the industry and encouraged inappropriate uses for instruments like sukuks.” Others argue that standardization wouldn’t be necessary if international banks hadn’t jumped on the bandwagon and come into Muslim countries with the idea of paying lip service to Islamic
banking by pushing every esoteric structured product through the system. They believe that Islamic banks should continue to do what they are good at— follow classic banking models, with
financing to come from deposits. Then there are those who favor practical standards. “You don’t have to standardize products, but there’s nothing wrong with standardizing procedures,”
says Wilson. “There are different principles of Islamic jurisprudence, but there’s no reason why principles can’t be done in a way that gives confidence to the market.”
ISLAMIC BANKINGCONVENTIONAL BANKING
1. Money is not a commodity, good, or service. It has no price of its own and cannot be used in lending or borrowing for a price (i.e., interest).
2. Money is priced based on the concept of time value of money/opportunity cost, in
addition to the level of risk inherent in a given transaction.
1. Financing activities must be backed by tangible assets.
2. Financing activities are mostly carried out back to back without being asset backed.
1. Money (a stream of cash flow) cannot be exchanged against money (another stream of cash flow) for a price.Exchanging different streams of cash flow in terms of interest paid/received or timing of payment/collection is a common practice.
2. Transactions and activities that involve an element of uncertainty (speculation) regarding outcome and/or timing of execution or delivery are not allowed.Uncertainty and risk management are part and parcel of conventional banking activities
1. Penalties on late payments are prohibited. If penalties are levied, they must be re-channelled to charities.
2. Fees are typically charged for late payments.
1. Transactions and activities that involve engagement with unlawful business sectors, such as gambling and alcohol, are not allowed.
2. Besides money laundering and the financing of criminal activities, how customers use borrowed funds is typically unrestricted.
Source: Al Meezan Guide to Islamic Finance, Morgan Stanley Research.
Challenges to Development
Standardization is one of many challenges to future development. Morgan Stanley has identified four other areas of concern. First, the scarcity of Shariah scholars who are well versed in both Islam and finance leads to overburdened Shariah boards and slow approval processes. Second, Shariah compliance leads to greater product complexity, higher skills requirements, and more onerous documentation. Third, because of the unique aspects of Islamic finance and lack of hedging instruments, liquidity makes risk management that much more challenging. Finally, says Morgan Stanley, there is competition from conventional banking. Industry leaders are unfazed. “At the moment, Islamic finance only accounts for 1 percent of the global financial market,” says DIFC’s Thani. “We have done a lot of growing up in the past few years, and we’re conscious of the weaknesses in the system. We’re always addressing those. It’s difficult to set a time for the development of a level playing field [with conventional banking], but I think it will be relatively fast.”
Maha Khan Phillips is a financial journalist based in London.
Monday, April 6, 2009
Malaysia Deposit Insurance ready for the worst
Monday April 6, 2009
MALAYSIA Deposit Insurance Corp (PIDM) has set up teams and a comprehensive risk assessment system in preparation for any crisis.
“Last year, we developed a risk assessment system which allows us to slice and dice the information, do trending between peer groups and monitor non-performing loans,’’ said PIDM CEO Jean Pierre Sabourin.
As an independent statutory body, PIDM assesses the financial institutions based on the least cost approach. Backed by a team of six risk managers, it meets Bank Negara, which is the supervisor, once a month to share information and discuss issues of concern.
“We also spend a lot of time on the intervention and resolution framework,’’ Sabourin told StarBiz. PIDM has powers to intervene into a problem institution to mitigate the loss, provide financial assistance, purchase assets, provide guarantees or make deposits. If the institution is deemed unviable, intervention powers include taking control, nationalisation, liquidation, finding the least cost solution, purchase assumptions, recapitalisation, doing bridge banks or agency agreements.
The US Federal Deposit Insurance Corp (FDIC) and the Canadian Deposit Insurance Corp (CDIC) have all those powers too. Sabourin had worked at the CDIC for 30 years, of which he was CEO for 15 years.
The deposit insurance system complements Bank Negara’s role in protecting depositors and contributing to financial stability.
The principle is to intervene properly and find quick solutions in the best interests of the financial system.
“If the institution is liquidated through the court process, we would be obligated to reimburse depositors,’’ said Sabourin who has experience with 43 bank failures in Canada.
Since the end of last year, PIDM has been developing a comprehensive payout system which will be rolled out in phases over the next two years. This involved complex calculations, looking at ways to obtain access to all the deposits, reconciling all deposit liabilities and aggregating accounts.
Besides that, the payout system looks at calculation of interest, uncleared cheques, reconciliation for depositors and transfer of the deposit base to a new institution. Another avenue is to sell the bank branches.
“When we do resolution, we don’t just look at costs but at other issues such as contagion and public concerns,’’ said Sabourin.
“We are the responsible organisation to deal with troubled banks. When the situation cannot be rectified by the regulator, it becomes a viability issue and our responsibility to intervene,’’ he added.
However, banks in Malaysia are in good shape based on financial stability reports and the data and observations made at PIDM.
“We have teams working day and night now on approaches and policies on contingency planning,’’ he said.
To reward banks with better risk profiles, a new method of collecting premiums called the differentiated premium system was implemented.
Taking into account qualitative and quantitative factors, it does back testing and checks on factors to assess banks individually and as a group.
PIDM has come up with the best bank model looking at ratios such capital, efficiency and profit volatility.
In comparison with the previous flat rate of 0.06% of insured deposits, banks in No. 1 category pay less premiums which had totalled RM100mil per year for three years since the formation of PIDM.
Based on the higher deposit base at banks, the premiums collected by PIDM is projected to increase. But this amount can be mitigated if a bank falls in No. 1 category (0.03%); No. 2 (0.06%); No. 3 (0.12%) and No. 4 (0.24%).
For 2008 which was the first year of implementation, the banks enjoyed a transitional mechanism where quantitative scores were adjusted upwards by 20%. Risk ratings also take into account Bank Negara ratings (35%).
For 2009, there is no transitional mechanism; by May 31, the results will be available of the first year of implementation of the new system.
“Based on the Canadian experience of the best bank model, we saw a substantial increase in banks going to highest category.
“This information is provided to the board which will probably ask the CEO why their bank is paying more premium to PIDM,’’ said Sabourin.
PIDM has a current fund size of about RM280mil. “The premiums charged cannot be large enough for the banks to start charging customers for it,’’ said Sabourin.
In most cases, deposit insurers build a target fund which is large enough to deal with losses expected. A system of early intervention based on viability, not insolvency, should help to contain losses.
In Malaysia, the deposit insurer is a government agency. It also has the authority to borrow from the Government or issue debt.
PIDM funds are invested only in government securities, based on the objective of capital preservation.
“This year, we are building a target fund with some proxies to evaluate the kind of fund and level we would be comfortable with. Then, we can reduce premiums further. We have done that in Canada and the process can take 10 to 15 years,’’ he said.
The target fund is based on probability of bank failures and loss given default (how much it costs if a bank fails). There is no history in Malaysia, hence the need to find some proxies.
Target funds can become very huge. The FDIC had more than US$50bil two years ago and paid rebates.
http://biz.thestar.com.my/news/story.asp?file=/2009/4/6/business/3637330&sec=business
MALAYSIA Deposit Insurance Corp (PIDM) has set up teams and a comprehensive risk assessment system in preparation for any crisis.
“Last year, we developed a risk assessment system which allows us to slice and dice the information, do trending between peer groups and monitor non-performing loans,’’ said PIDM CEO Jean Pierre Sabourin.
As an independent statutory body, PIDM assesses the financial institutions based on the least cost approach. Backed by a team of six risk managers, it meets Bank Negara, which is the supervisor, once a month to share information and discuss issues of concern.
“We also spend a lot of time on the intervention and resolution framework,’’ Sabourin told StarBiz. PIDM has powers to intervene into a problem institution to mitigate the loss, provide financial assistance, purchase assets, provide guarantees or make deposits. If the institution is deemed unviable, intervention powers include taking control, nationalisation, liquidation, finding the least cost solution, purchase assumptions, recapitalisation, doing bridge banks or agency agreements.
The US Federal Deposit Insurance Corp (FDIC) and the Canadian Deposit Insurance Corp (CDIC) have all those powers too. Sabourin had worked at the CDIC for 30 years, of which he was CEO for 15 years.
The deposit insurance system complements Bank Negara’s role in protecting depositors and contributing to financial stability.
The principle is to intervene properly and find quick solutions in the best interests of the financial system.
“If the institution is liquidated through the court process, we would be obligated to reimburse depositors,’’ said Sabourin who has experience with 43 bank failures in Canada.
Since the end of last year, PIDM has been developing a comprehensive payout system which will be rolled out in phases over the next two years. This involved complex calculations, looking at ways to obtain access to all the deposits, reconciling all deposit liabilities and aggregating accounts.
Besides that, the payout system looks at calculation of interest, uncleared cheques, reconciliation for depositors and transfer of the deposit base to a new institution. Another avenue is to sell the bank branches.
“When we do resolution, we don’t just look at costs but at other issues such as contagion and public concerns,’’ said Sabourin.
“We are the responsible organisation to deal with troubled banks. When the situation cannot be rectified by the regulator, it becomes a viability issue and our responsibility to intervene,’’ he added.
However, banks in Malaysia are in good shape based on financial stability reports and the data and observations made at PIDM.
“We have teams working day and night now on approaches and policies on contingency planning,’’ he said.
To reward banks with better risk profiles, a new method of collecting premiums called the differentiated premium system was implemented.
Taking into account qualitative and quantitative factors, it does back testing and checks on factors to assess banks individually and as a group.
PIDM has come up with the best bank model looking at ratios such capital, efficiency and profit volatility.
In comparison with the previous flat rate of 0.06% of insured deposits, banks in No. 1 category pay less premiums which had totalled RM100mil per year for three years since the formation of PIDM.
Based on the higher deposit base at banks, the premiums collected by PIDM is projected to increase. But this amount can be mitigated if a bank falls in No. 1 category (0.03%); No. 2 (0.06%); No. 3 (0.12%) and No. 4 (0.24%).
For 2008 which was the first year of implementation, the banks enjoyed a transitional mechanism where quantitative scores were adjusted upwards by 20%. Risk ratings also take into account Bank Negara ratings (35%).
For 2009, there is no transitional mechanism; by May 31, the results will be available of the first year of implementation of the new system.
“Based on the Canadian experience of the best bank model, we saw a substantial increase in banks going to highest category.
“This information is provided to the board which will probably ask the CEO why their bank is paying more premium to PIDM,’’ said Sabourin.
PIDM has a current fund size of about RM280mil. “The premiums charged cannot be large enough for the banks to start charging customers for it,’’ said Sabourin.
In most cases, deposit insurers build a target fund which is large enough to deal with losses expected. A system of early intervention based on viability, not insolvency, should help to contain losses.
In Malaysia, the deposit insurer is a government agency. It also has the authority to borrow from the Government or issue debt.
PIDM funds are invested only in government securities, based on the objective of capital preservation.
“This year, we are building a target fund with some proxies to evaluate the kind of fund and level we would be comfortable with. Then, we can reduce premiums further. We have done that in Canada and the process can take 10 to 15 years,’’ he said.
The target fund is based on probability of bank failures and loss given default (how much it costs if a bank fails). There is no history in Malaysia, hence the need to find some proxies.
Target funds can become very huge. The FDIC had more than US$50bil two years ago and paid rebates.
http://biz.thestar.com.my/news/story.asp?file=/2009/4/6/business/3637330&sec=business
Malaysian banks’ Tier-1 capital ratio high
Monday April 6, 2009
REGULATORS in financial crisis-hit countries are now using Tier-1 capital ratio as an indicator of a bank’s ability to absorb losses and subsequently, the likelihood of it collapsing.
REGULATORS in financial crisis-hit countries are now using Tier-1 capital ratio as an indicator of a bank’s ability to absorb losses and subsequently, the likelihood of it collapsing.
Customers of Malaysian banks, however, have nothing to fear as the industry average of Tier-1 capital ratio for these banks stood at 10.7% in January and looks to be going higher.
By now too, most people will realise that Malaysian banks did not invest much in subprime assets and so did not see the kind of losses that have sucked out the capitalisation of some global institutions.
As the financial meltdown continues in the United States, western Europe and elsewhere, attention has shifted to Tier-1 capital and “core capital” of banks as a more reliable measure of financial strength, compared with other numbers and ratios.
Tier-1 capital and its cousin, Tier-2 capital, were first defined in Basel 1 accords in 1988 and, according to experts, have remained largely the same in the current Basel 2 regime.
There is a difference between Tier-1 capital and “core capital”. Tier-1 is composed of core capital that is ordinary shares and disclosed reserves, but may also include other securities that satisfy regulations, such as irredeemable non-cumulative preferred stocks.
So, even Malaysian banks, which are largely uninvolved in this round of financial mischief, have to “jump to” and boost Tier-1 capital, just to be on the safe side.
Since the tail-end of last year, our banks have made no secret of the fact that they are strengthening their capital positions, and putting themselves on more defensive positions to face global and possibly domestic recessions (refer to table).
Some of these institutions’ capital-strengthening exercises began even as early as April last year.Some industry sources had earlier this year pointed out that Tier-1 capital ratio above 10% could be an inefficient use of capital, being too conservative.
Granted, the crisis has expanded beyond subprime assets alone and Malaysian banks may be justified to boost their various reserves and share capital.
A dealer points out the only two banks – CIMB Bank Bhd and Malayan Banking Bhd (Maybank) – have expanded in any meaningful way overseas.
It should be noted that CIMB is widely considered to be well capitalised and Maybank last month had its ratings outlook upgraded to “stable” from “evolving” by Fitch Ratings.
It should be noted that CIMB is widely considered to be well capitalised and Maybank last month had its ratings outlook upgraded to “stable” from “evolving” by Fitch Ratings.
Maybank was put on ratings watch last year by Fitch when it completed the acquisition of PT Bank Internasional Indonesia Tbk for a price that was considered high and could hamper its dividend payout.
Maybank’s ratings outlook was upgraded due to an upcoming substantially underwritten rights issue that is expected to raise RM5bil to RM6bil that will replenish core capital.
There are comments that Tier-1 capital as a measure of financial soundness of banks is actually open to manipulation.
Certain Western banks have 90% of Tier-1 capital consisting of instruments other than ordinary shares and disclosed reserves, causing regulators to look at core capital.
As for Malaysian banks, Bank Negara’s recent annual report for 2008 says 90% of Tier-1 capital in the country’s banks consist of “ordinary shares, share premium, statutory reserves, general reserves and retained earnings net of unaudited losses, less goodwill.”
So Malaysian banks should be in a good position to weather the global financial storm.
In terms of stock price, however, investment interest prefers cheaper banking stocks that have been battered down in neighbouring stock exchanges.
A banking analyst at a local brokerage had told StarBiz: “We were slower to go down during the market meltdown and during rallies we are also slower to go up.”
http://biz.thestar.com.my/news/story.asp?file=/2009/4/6/business/3598496&sec=business
http://biz.thestar.com.my/news/story.asp?file=/2009/4/6/business/3598496&sec=business
Tuesday, March 31, 2009
Changes seen at helm of three banks
Tuesday March 31, 2009
PETALING JAYA: Key changes are imminent at several local banks which will see the exit (and entry) of prominent bankers even as the global economic woes add to the challenges faced by the country’s finance sector.
According to sources, Bank Pembangunan Malaysia Bhd president and group managing director Datuk Tajuddin Atan is tipped to take over the helm at RHB Banking Group from Michael J. Barrett. It is believed that the appointment has the approval of Bank Negara.
Barrett joined the group in January 2005 as CEO of RHB Bank Bhd and was appointed group managing director of RHB Capital Bhd on Oct 8, 2007. He is currently also group managing director of the RHB Banking Group. His term would expire in June this year, a source said.
The Employees’ Provident Fund owns 57.55% and Abu Dhabi Commercial Bank a 25% interest in the banking group. RHB Capital recently released its financial year 2008 results which showed a 47% year-on-year improvement in net profit to RM1.049bil, in line with estimates. Still, there are concerns that the global economic slowdown may crank up the pressure on the group’s asset quality.
Tajuddin, who has 25 years’ experience in the sector, was CEO of Bank Simpanan Nasional before being appointed to helm Bank Pembangunan on Dec 1, 2007.
It is also widely speculated that EPF head of strategic planning unit Johari Abdul Muid may be appointed chief operating officer of the banking group. “There’s no news or confirmation of that appointment,” a source said.
EPF is under pressure to perform well and provide good returns against a tough operating climate that has seen a drastic fall in equity values. It declared a 4.5% dividend for 2008 versus 5.8% the previous year. It is also believed that Affin Bank Bhd managing director and CEO Datuk Seri Abdul Hamidy Abdul Hafiz’s term will come to an end in June; there is no word yet on whether he will continue heading the bank. Hamidy is also chairman of the Association of Banks in Malaysia.
Affin Bank’s parent company, Affin Holdings Bhd, is the flagship financial services subsidiary of Lembaga Tabung Angkatan Tentera (LTAT), which is its major shareholder.
Hamidy was appointed to the top seat at Affin Bank in June 2003, when the bank was going through a trying time, with rising bad loans that reached a staggering 25%. He has since managed to bring the non-performing loans to a more manageable level of under 5%.
Elsewhere, EON Bank Bhd is also set to have a new boss. In response to a news article, parent company EON Capital Bhd announced that the bank’s CEO Albert Lau Yiong “has indicated his desire to retire from the group” when his term of appointment expires on April 26. Lau is also group CEO and executive director of EON Capital. He has been with the group for more than 24 years.
It is understood that Michael Lor, who heads the bank’s consumer banking business, will be the acting CEO.
According to sources, Lau may have opted to retire for personal reasons. It is generally perceived that he is closely tied to EON Capital’s major shareholder, Rin Kei Mei. The company’s largest shareholder is Hong Kong-based private equity firm Primus Pacific Partners LLP.
http://biz.thestar.com.my/news/story.asp?file=/2009/3/31/business/3590721&sec=business
PETALING JAYA: Key changes are imminent at several local banks which will see the exit (and entry) of prominent bankers even as the global economic woes add to the challenges faced by the country’s finance sector.
According to sources, Bank Pembangunan Malaysia Bhd president and group managing director Datuk Tajuddin Atan is tipped to take over the helm at RHB Banking Group from Michael J. Barrett. It is believed that the appointment has the approval of Bank Negara.
Barrett joined the group in January 2005 as CEO of RHB Bank Bhd and was appointed group managing director of RHB Capital Bhd on Oct 8, 2007. He is currently also group managing director of the RHB Banking Group. His term would expire in June this year, a source said.
The Employees’ Provident Fund owns 57.55% and Abu Dhabi Commercial Bank a 25% interest in the banking group. RHB Capital recently released its financial year 2008 results which showed a 47% year-on-year improvement in net profit to RM1.049bil, in line with estimates. Still, there are concerns that the global economic slowdown may crank up the pressure on the group’s asset quality.
Tajuddin, who has 25 years’ experience in the sector, was CEO of Bank Simpanan Nasional before being appointed to helm Bank Pembangunan on Dec 1, 2007.
It is also widely speculated that EPF head of strategic planning unit Johari Abdul Muid may be appointed chief operating officer of the banking group. “There’s no news or confirmation of that appointment,” a source said.
EPF is under pressure to perform well and provide good returns against a tough operating climate that has seen a drastic fall in equity values. It declared a 4.5% dividend for 2008 versus 5.8% the previous year. It is also believed that Affin Bank Bhd managing director and CEO Datuk Seri Abdul Hamidy Abdul Hafiz’s term will come to an end in June; there is no word yet on whether he will continue heading the bank. Hamidy is also chairman of the Association of Banks in Malaysia.
Affin Bank’s parent company, Affin Holdings Bhd, is the flagship financial services subsidiary of Lembaga Tabung Angkatan Tentera (LTAT), which is its major shareholder.
Hamidy was appointed to the top seat at Affin Bank in June 2003, when the bank was going through a trying time, with rising bad loans that reached a staggering 25%. He has since managed to bring the non-performing loans to a more manageable level of under 5%.
Elsewhere, EON Bank Bhd is also set to have a new boss. In response to a news article, parent company EON Capital Bhd announced that the bank’s CEO Albert Lau Yiong “has indicated his desire to retire from the group” when his term of appointment expires on April 26. Lau is also group CEO and executive director of EON Capital. He has been with the group for more than 24 years.
It is understood that Michael Lor, who heads the bank’s consumer banking business, will be the acting CEO.
According to sources, Lau may have opted to retire for personal reasons. It is generally perceived that he is closely tied to EON Capital’s major shareholder, Rin Kei Mei. The company’s largest shareholder is Hong Kong-based private equity firm Primus Pacific Partners LLP.
http://biz.thestar.com.my/news/story.asp?file=/2009/3/31/business/3590721&sec=business
Saturday, March 28, 2009
Safest capital for banks
Saturday March 28, 2009
REGULATORS and investors globally are beginning to look at banks’ shareholders funds as the safest form of capital that the financial institutions may use.
As losses have begun to wipe out shareholders funds, some Western banks now see they make up less than 1% of Tier-1 capital.
Tier-1 capital is widely considered the core measure of a bank’s financial strength, but not when shareholders fund is only 1% of the total, Jupiter Securities Sdn Bhd research head Pong Teng Siew tells StarBizWeek.
According to Pong, the reason for this is partly the use of structured products as Tier-1 capital, also known as innovative Tier-1 capital by some large multinational banks.
“You cannot be operating on structured products as capital. Losses can be absorbed by shareholders funds but not by these structured (products).”
Looking at Malaysian banks, the same problem does not exist with shareholders funds, as defined in the balance sheet, exceeding the total value of Tier-1 capital.
Pong agrees that Malaysian banks, being more conservative, are not facing the same problem and still stand up well in the light of this new benchmark measure.
He points out that Bank Negara in its annual report on Wednesday has expressed similar sentiments.
In fact the central bank mentions that Malaysia has begun using innovative Tier-1 capital instruments as well, although likely to a smaller extent.
“Despite the more active capital management activities by banking institutions in recent years and introduction of more innovative Tier-1 capital instruments, approximately 90% of Tier-1 capital comprised ordinary shares, share premium, statutory reserves, general reserves and retained earnings (net of unaudited losses) less goodwill,” Bank Negara says in its annual report.
As a result of the high use of share capital, the equity to assets ratio of the banking system is at 10% of total risk-weighted assets or 6.8% of total assets. Even for investment banks, the equity to assets ratio remains manageable at 6.9% to 47.7%.
“This still compares favourably with the benchmark used by the US regulators that deem any Tier-1 capital to total assets ratio of more than 3% to 4% as strong.
“Arising from the current crisis, there has been greater emphasis on traditional capital (ordinary shares and reserves) to gauge the capital strength of banking institutions,” Bank Negara says, adding that it will monitor closely international developments in this area.
http://thestar.com.my/news/story.asp?file=/2009/3/28/business/3567560&sec=business
REGULATORS and investors globally are beginning to look at banks’ shareholders funds as the safest form of capital that the financial institutions may use.
As losses have begun to wipe out shareholders funds, some Western banks now see they make up less than 1% of Tier-1 capital.
Tier-1 capital is widely considered the core measure of a bank’s financial strength, but not when shareholders fund is only 1% of the total, Jupiter Securities Sdn Bhd research head Pong Teng Siew tells StarBizWeek.
According to Pong, the reason for this is partly the use of structured products as Tier-1 capital, also known as innovative Tier-1 capital by some large multinational banks.
“You cannot be operating on structured products as capital. Losses can be absorbed by shareholders funds but not by these structured (products).”
Looking at Malaysian banks, the same problem does not exist with shareholders funds, as defined in the balance sheet, exceeding the total value of Tier-1 capital.
Pong agrees that Malaysian banks, being more conservative, are not facing the same problem and still stand up well in the light of this new benchmark measure.
He points out that Bank Negara in its annual report on Wednesday has expressed similar sentiments.
In fact the central bank mentions that Malaysia has begun using innovative Tier-1 capital instruments as well, although likely to a smaller extent.
“Despite the more active capital management activities by banking institutions in recent years and introduction of more innovative Tier-1 capital instruments, approximately 90% of Tier-1 capital comprised ordinary shares, share premium, statutory reserves, general reserves and retained earnings (net of unaudited losses) less goodwill,” Bank Negara says in its annual report.
As a result of the high use of share capital, the equity to assets ratio of the banking system is at 10% of total risk-weighted assets or 6.8% of total assets. Even for investment banks, the equity to assets ratio remains manageable at 6.9% to 47.7%.
“This still compares favourably with the benchmark used by the US regulators that deem any Tier-1 capital to total assets ratio of more than 3% to 4% as strong.
“Arising from the current crisis, there has been greater emphasis on traditional capital (ordinary shares and reserves) to gauge the capital strength of banking institutions,” Bank Negara says, adding that it will monitor closely international developments in this area.
http://thestar.com.my/news/story.asp?file=/2009/3/28/business/3567560&sec=business
Monday, March 23, 2009
Banks give advice on appropriate risk management
Monday March 23, 2009
BANKS have turned cautious on trade financing for which demand has dropped by as much as 70% in certain cases.
While these facilities remain largely available, banks are requiring customers to be more aware of the factors that could affect the viability of their business plans.
According to HSBC Bank Malaysia Bhd director (trade and supply chain) Vivek Gupta, the bank has been extending trade finance as usual but with additional advice on appropriate risk management.
“Clients need to understand and anticipate much better than ever before in this challenging economic climate. They need to be aware of the changes in foreign exchange, bank and country risks and impact of falling demand on their cashflows.
“Enlightened clients engage effectively with banks and gain easier access to trade financing,” he told StarBiz.
In line with the slowdown in business, banks are also expected to experience a decreased demand for trade financing.
Gupta said the sluggish business environment was due to lower demand in terms of the number of units sold and the plunge in global commodity prices.
“Consequently, customers do not require as much working capital now as they used to before the financial crisis,” he said.
“Generally, for customers dealing in commodities, the average trade financing required from banks has now fallen by 60% to 70% from peak requirements,” he said.
Citi Malaysia head of treasury and trade solutions, global transaction services, Noel Saminathan, said trade financing for established exporters would remain available under the current sluggish economic conditions.
“Banks continue to assess applications based on viability of business plans, which among others, take into account the health of the export markets. Trade financing will continue to be offered competitively, yet prudently, by banks,” he said.
He added that export credit insurance could also help exporters improve the risk profile of their cashflow to gain better financing terms from banks.
“Global banks have the ability to assess and assume cross-border risks through our international networks. Risk premiums have risen generally across the world and we expect costs for credit protection to be elevated for the rest of the year,” he said.
Saminathan said credit costs were reflective of risk premiums, besides underlying cost of funds.
“The difficult interbank credit markets globally have increased costs for financing in international currencies but local currency financing remains less affected.
“Trade financing costs for medium to large Malaysian companies are among the most competitive in the Asia-Pacific region,” he said.
OCBC Bank (M) Bhd head of global trade finance, group transaction banking, Chuang Boon Kheng said that although trade financing in terms of letters of credit and pre-shipment financing were among the core products of banks, customers’ needs now might be skewed towards credit enhancement and credit protection solutions.
“Customers’ need for trade financing may have slipped since the financial turmoil due to reduction in orders while manufacturing companies may be resorting to ‘just in time’ inventory control practices.
“But we believe that in any economic environment, there will be industries that flourish and new enterprises will emerge with viable business plans. At the same time, there will be industries that might face a tougher operating environment and businesses that fail to plan for their survival.
“Individual banks will have their own target segments and expertise to continue to support viable enterprises,” she said.
Recently customers seemed to have regained confidence following the various positive initiatives put in place by the Government, Chuang said.
“We have seen customers start to order consumables, necessities and spare parts in small quantities from the start of this month. However, the volume of trade financing may not be there due to an ease in (product and commodity) prices,” she said.
· About 90% of world trade valued at US$14 trillion is funded via trade finance.
· Trade finance is also needed to bridge the gap between the time exporters deliver the products and receive payment from buyers.
· The most common trade finance facility is the letter of credit (LC) that includes pre-shipment finance, post-shipment finance and import finance.
http://thestar.com.my/news/story.asp?file=/2009/3/23/business/3465379&sec=business
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