NEW YORK The new head of Malaysia's largest lender, Malayan Banking Bhd (Maybank), poured cold water on speculation he was readying a bid to buy assets in Thailand, calling that nation's banking sector over-valued in an interview on Tuesday.
Since being named president and chief executive officer of Maybank (MBBM.KL) in August, Abdul Farid Alias, has faced questions on how the bank intends to meet its goal of increasing the share of earnings from outside Malaysia to 40 percent.
Maybank, with operations across Southeast Asia, but lacking a commercial banking operation in Thailand, was thought to be readying a bid for a stake in Bangkok-based TMB Bank Pcl (TMB.BK) that Dutch financial services company ING Groep NV (ING.AS) wants to sell. TMB is Thailand's seventh-largest lender.
"People assume we will acquire something in Thailand to make up the 40 percent," Abdul Farid told Reuters, although not mentioning TMB specifically.
"It is not a situation that we will do a deal at any cost," he said, adding that he believed Thailand's banking sector, as a whole, is currently over-valued.
Any deal would have to be add to earnings either immediately or within one year, he said.
The earnings from operations outside of Malaysia accounted for 31.5 percent of the overall results in the first half of 2013, Abdul Farid said. The bank reported a 9 percent increase in second quarter net profit.
A five-year business plan, created in 2010, based growth projections on the probable need to buy assets in order to achieve its targets. That is no longer the case, he said.
"The idea that we have right now is (that) we probably don't have to resort to M&A to achieve that 40 percent objective," Abdul Farid said.
Instead, for the same kind of money that might be spent on banking assets in Thailand, Abdul Farid said Maybank could probably get similar, if not better, returns by investing in operations in Singapore, Indonesia or the Philippines.
"We may or may not meet the target of 40 percent by 2015. That will be the scorecard at the time according to our shareholders ... if there is nothing that makes sense, we are not going to do it," he said referring to the purchase of assets.
Instead of buying a commercial banking operation in Thailand, Maybank could just open up a branch to add to its already established brokerage business, Abdul Farid said.
In Indonesia, where Maybank is being told by regulators to sell down its stake in Jakarta-listed Bank Internasional Indonesia (BII) (BNII.JK) to 80 percent, Abdul Farid said the stake has been reduced to 90 percent from 97 percent.
"Depending on the market we will try to meet the regulatory authorities' requirement as soon as possible," he said.
Separately, the outlook for the initial public offering market in Malaysia next year looks healthy with a solid pipeline, but overall volumes are unlikely to change from 2013.
FOCUSING ON GAPS
Abdul Farid was previously Maybank's head of global wholesale banking, as well as being deputy president. He beat out two executives who have since left the bank, but insists they remain friends.
Since the last strategic plan was drawn up in 2010, Abdul Farid admitted the bank, Southeast Asia's fourth largest in terms of banking assets, left too many product areas uncovered.
"We do fixed income sales and trading. We do investment in some of the government paper and corporate paper. But historically we have not done a lot of derivatives investments for clients," Abdul Farid said.
"Simple interest rate swaps, simple cross-currency swaps, these were left on the table," he said.
Other gaps in service he is looking to close include better serving investment banking clients in Singapore and Indonesia as well as ensuring consumer banking units in each country Maybank operates share experiences to see what can work regionally.
"So there are a lot of things over the last 2-1/2 years that we could have done better," he said before highlighting the growth of derivatives products in Singapore.
"These are the product capabilities we need to make sure we don't leave too much on the table anymore."
(Reporting By Daniel Bases; Editing by Tim Dobbyn)