More groups eye regional investment banking

THE wheels at the Maybank/Kim Eng group are moving ahead based on its ambitious regional scrorecard for investment banking (IB).

By outlining its bold targets, Maybank/Kim Eng is also issuing a strong challenge to the other IB groups in Malaysia that may have similar aspirations.

For the moment, it looks like apart from the CIMB/GK Goh tie-up, there is no true rival yet to this potentially formidable Maybank/Kim Eng grouping.

At the start, one question that needs to be asked is whether Maybank/Kim Eng has been too aggressive in setting its targets and therefore, may be biting off more than it can chew.

For instance, it aims to grow its regional asset management business 10-fold in five years' time from S$2bil currently.

In the first place, targets have to be high for the workforce to aspire to; at the same time, they have to be realistic.

In this case, that S$20bil figure in five years' time will certainly be something to watch out for.

After all, five years is not too far away!

As a reference point, the targets that the Maybank group had set for itself under its LEAP 30 transformation programme have been met and even exceeded, as seen from its financial results.

Kim Eng itself has a top five position in Singapore, Thailand, Indonesia and the Philippines.

Therefore, the group's aspiration to be a leading stockbroker in the region may not be too far-fetched, as Kim Eng has built up considerable presence in six out of 10 countries in Asean.

“This tie-up with Kim Eng is a natural progression of Maybank's business plan,'' opines an analyst. “There is actually no other way to go and there are few strong takeover candidates left after CIMB bought into GK Goh.''

Maybank spent S$1.79bil to acquire 100% of Kim Eng, which notched a pre-tax profit of S$128.9mil for the year from June 2010 to July 2011.

In the retail and commercial banking space, Maybank is already reaping sizeable profits from its overseas business.

In fact, Maybank expects its overseas business to contribute 40% to its profits from 21% currently.

The bulk of the profit is expected to come from its operations in Singapore and Indonesia.

Maybank has 22 branches in Singapore. It also has 344 branches in Indonesia under PT Bank Internasional Indonesia and one branch under PT Bank Maybank Syariah Indonesia.

Meanwhile, Kim Eng has three branches in Singapore and four in Indonesia.

Besides the Asean market, expansion into the global markets is also targeted, namely, into the Middle East, China and India.

Kim Eng has already set up presence in Hong Kong, London and New York places where Maybank also has offices or branches in addition to Shanghai and Beijing.

So far, three major banking groups Maybank, CIMB and RHB Capital (potentially with OSK Holdings) have made moves to strengthen their IB footprint in the region.

It will be interesting to see the plans of the other big boys the Hong Leong group, Public Bank and AMMB group to boost their position and counter the aggressive moves by their competitors.

Hong Leong, which has stated its intention to also be a regional financial services player, does not look likely to sit and do nothing. It is eyeing opportunities but will usually wait patiently for a good candidate.

Public Bank is dynamic in retail and commercial banking; it has not made major moves into the IB sphere.

The AMMB group is strong in the domestic IB scene, with some presence in the region, especially in Singapore and Indonesia.

Following the entry of the Australia New Zealand banking group, it would not be a surprise if the strengthened AMMB group attracts another substantial partner, this time, in IB.