By Abhrajit Gangopadhyay
Maybank Investment Bank has been expanding its footprint in Southeast Asia, with its $1.4 billion purchase of Singapore’s Kim Eng Holdings Ltd. in 2011 counting as its largest acquisition in recent years. The unit of Malayan Banking Bhd., Malaysia’s largest bank by assets, is also expanding its expertise from bread-and-butter capital-raising initiatives for institutional clients to, for example, focus on retail brokering in some markets.
In an interview with The Wall Street Journal, Chief Executive Tengku Zafrul Aziz shares his views on Malaysia’s deal pipeline, the bank’s deal outlook in the region and immediate challenges to its goal of emerging as a regional financial powerhouse by 2015.
Following are edited excerpts:
On the deal pipeline in Malaysia and the region: In Malaysia, last year was good. This year seems good, but not as good as the past year. The first quarter has been slow, as some deals were put on hold due to Malaysia’s general election. In the second quarter, we saw some catch-ups, and we see a very strong third quarter in terms of our pipeline.
Maybank
Maybank Investment Bank CEO Tengku Zafrul Aziz
On the equities side, there are quite a number of initial public offerings, but not as big as Felda Global Venture Holdings’ [at $3.2 billion, the world’s third-largest IPO last year]. Apart from IPOs of Westports, Malakoff, UMW’s oil and gas assets and Ranhill Energy [IPOs that could raise as much as $2 billion combined], there are few, news of which isn’t out yet. The market looks good and the pipeline is strong.
Also on the equities side, there are lots of placement deals that are coming onstream, and we expect a few more mergers and acquisitions to happen as well. In aggregate, the volume of IPOs in Malaysia will be higher than the rest of the region. Singapore will also have some small deals, mostly of real estate funds or real estate investment trusts.
In debt capital markets, we are expecting quite a number of bond issues on the infrastructure side to come through. However, on the corporate side, surprisingly we aren’t seeing a strong deal pipeline yet. Our visibility is only up to the next quarter.
On Maybank’s outlook:
When it comes to big private placements or big IPOs, these are rare in markets like Vietnam and Thailand, where retail broking is big business. We are strategically present in India through the full-fledged broking business of Kim Eng. Right now, we are looking at how to leverage our position there.
In China, we are waiting for the Maybank Group to start operations in a big way. To be really successful, we think we need to have a bank with us. Currently, we have only two bank branches in China.
On challenges to growth:
Internally there is a challenge to get quality human capital to support business growth. Competition for talent is growing in Malaysia and, more so, in Indonesia. In Singapore and Hong Kong, where markets are mature, we can recruit good talent, but in growth economies, such as Indonesia and Vietnam, it is very difficult. The cost of procuring new talent is going up, but as long as they are productive, it’s okay for us.
Externally, there are many challenges. For us, the competition is not only from typical investment banks but also from brokerages. The landscape has changed. We have to be mindful of that and adjust ourselves. We are in a very traditional form of servicing, but we are lucky that we are at the forefront of all the markets. Where we have broking, we have to be ready [to deliver services] over the Internet, on mobile devices and at banks. We have to review how we integrate stock broking with our [investment and retail] banking.
The other challenges are coming from traditional global banks. I see more competition from HSBC and Standard Chartered. They have investment banking divisions and are involved in some capital market deals using their parents’ balance sheets. In this region, we are competing against them as well as traditional investment banks.
Maybank Sees Strong Malaysian Deal Pipeline for Rest of the Year
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