Maybank Investment Bank (Maybank IB) has come a long
way from when it struggled to compete against the established investment banks
in Malaysia. Today, it ranks high in the league tables in Malaysia and around
the region after the acquisition of Singapore broker Kim Eng last year. StarBizWeek asks
Maybank Kim Eng group chief executive Tengku Datuk Zafrul Aziz (pic)
what next and about the challenging business in the world of investment
banking. Below is his response:
SBW:
What more does Maybank IB need to complete its jigsaw of businesses?
Tengku
Zafrul: In
terms of new markets, we are in the middle of building up our derivatives
business and opportunities abound, especially given Maybank's strong
distribution network and existing client base. In this respect, we would be
helping our clients to take advantage of either bullish or bearish market
conditions through derivatives and structured products.
How
is the commercial bank's reach complementing its investment banking business?
We are
able to capitalise on investment banking deal opportunities around the region
through leveraging on Maybank's group's network, which includes the group's
strong balance sheet, infrastructure as well as relationship management.
Balance
sheet: Allow us access to business activities, cheaper costs of funding as well
as capital for transaction facilitation and underwriting.
Infrastructure:
Utilise leading edge technology as a source of competitive advantage and
seamless and timely operations across multiple geographies
Relationship
management: The group's client coverage team will allow us to leverage on their
regional relationship management model and provide our clients with proactive,
single point of contact. Also, by leveraging on client coverage, our clients
will be engaging with staff who have sufficient product knowledge & advisory
skills and competence.
What
is Maybank IB's strategy for the Middle East after it upped its stake in Anfaal
Capital?
We will
gradually grow our presence in the GCC (Gulf Cooperation Council), and in
particular build our Islamic Banking delivery mechanisms through our
partnership with Anfaal Capital. The GCC countries have massive current account
surpluses that they need to recycle overseas, and we will help to direct some
of those flows to Asean and the rest of Asia. Additionally, there are vast domestic
infrastructure projects that the GCC countries are continuing to develop, which
we expect to participate in.
Maybank
IB currently holds 18% equity interest in Anfaal. Anfaal is licensed to
undertake syariah compliant investment banking activities in the Kingdom of
Saudi Arabia.
This
will enable Maybank IB to showcase its sukuk structuring and other investment
banking capabilities in the Kingdom of Saudi Arabia jointly with Anfaal.
What
are the challenges Maybank IB faces in investment banking not only at home but
also in the region?
The key
challenge for the investment bank at home and in the region are interlinked.
Maybank needs to scale the business from its leadership position in the
Malaysian market into one of a regional leadership position.
The priority
is building regional market share while increasing its leadership position in
its home market.
This
has to be implemented in a disciplined and profitable manner in the face of
intensifying competition and a volatile market environment. The focus will be
on scalability of the platform into markets such as Indonesia and greater China
and gaining regional market share in areas like M&A, equity and equity
linked securities and leveraged finance.
It all
boils down to successful execution.
How
is the current jitteriness surrounding the global economy going to affect
Maybank IB after having expanded its presence through the acquisition of Kim
Eng?
The
jitteriness in the global economy, and particularly the ongoing crisis in the
eurozone, represents both opportunity and risk for us. Naturally, any
moderation in global growth and enhanced turbulence in global markets, is bad
for all financial institutions. But as the European banks are obliged to
withdraw from various business lines in our region (in order to preserve
capital for their domestic operations), it opens up space for well-capitalized
institutions like us to fill. The acquisition of Kim Eng gives us a
distribution network, regional research platform and Asean-wide investment
banking capability that positions us well to fill the vacuum being created in
numerous markets across Asia by the withdrawal of European competitors.
We see
global economic growth moderating further to 3% this year from 3.9% last year,
reflecting drag from major advanced economies, especially the recession in
Eurozone due to the financial crisis there.
There
are also concerns over China in light of the recent disappointing economic
figures for the month of April. Nonetheless, Asean economies in particular,
where Maybank KimEng has a strong presence, are expected to stay resilient
despite the fluid and volatile global environment as the region economies are
supported by domestic demand, with rooms to initiate macroeconomic policy
stimulus in terms of government spending and interest rate cuts if needs be.
Incoming
1Q 2012 numbers for Asean are encouraging. For example, Singapore rebounded
strongly to chalk annualised quarter on quarter growth of 9.9% in the first
three months of this year (4Q 2011: -2.5%). Indonesia's economic growth was
sustained at above 6% for the sixth quarter in a row at 6.3% year-on-year (yoy0
in 1Q 2012 vs 6.5% YoY in 4Q 2012. Thailand is fast recovering from the flood
late last year, while domestic consumer, business and government spending are
driving the economies of Malaysia and the Philippines.
Is
there a limit to what Maybank IB will do in order to grow its business,
especially in light of the problems facing the US investment banks and their
growth strategy?
We are
quite different from the US investment banks in that we do not have a presence
in some of the riskier areas of trading that got the US investment banks in
trouble like proprietary trading, large credit-derivative desks, etc. We
operate in tightly regulated markets, in traditional areas of investment
banking, and have learnt the lessons of the Asian financial crisis of 1997-98
well.
We
believe that we have the right pieces in place for us to grow. We have the
regional talent and resources, and we have a strong base with the support from
the Maybank Group.
Currently,
the teams are working hard towards achieving our vision of becoming a regional
financial powerhouse. Through the recent acquisition of Kim Eng, our regional
footprint has grown across 11 countries and we will continue to expand our
regional product offerings in order to become a truly regional organisation. We
now have operations in Malaysia, Singapore, Hong Kong, Thailand, Indonesia,
Philippines, India, Vietnam, London, New York and Saudi Arabia.
We are
currently focusing on establishing and expanding the lines of businesses
(investment banking & advisory, retail equities, institutional equities,
derivatives and asset management) in our home markets, which are Malaysia,
Singapore, Thailand and Indonesia. Our next step would be to establish and grow
the businesses in markets such as Philippines, Hong Kong, Vietnam, China and
India.
We
already have a presence in the Middle East via our investment in Anfaal Capital,
an Islamic investment bank. We are continuing to invest in this area in order
to tap into deal flows from the Middle East, as well as to further deepen our
expertise in Islamic Finance.
Will
Maybank IB overtake CIMB and is that important?
Every
organisation aims to be the best in its industry and Maybank IB is no
different. Overtaking competitors is at the top of everyone's list.
How
is Maybank IB planning to deal with competition not only from the Malaysian or
Singapore/International banks but also those from fast emerging economies in
Southeast Asia such as Indonesia?
We
believe that the medium and long term economic prospects of the South East
Asian region continue to be bright and that there will be ample opportunity for
multiple players to thrive. Our strategy is to build our regional capabilities
while at the same time maintaining and improving our deep domestic domain knowledge
and relationships cultivated over the decades in our key markets. We want our
platform to be able to service our clients' domestic needs as well as being
able to facilitate their access to regional and indeed global opportunities.
At the
same time, for the rest of the world looking at this region, we want Maybank IB
to be a “go to” name with a reputation for good execution and unparalleled
local knowledge in our key regional markets.
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