Thursday, August 17, 2017

First and only Malaysian bank branch arrives in town

Maybank began operations yesterday, making it the first and only Malaysian bank to open a branch in Myanmar.

Company officials say trade finance will be one of the main immediate opportunities, adding international interest in the local market is already expanding rapidly.

Maybank was one of nine foreign banks that won a conditional licence to open in Myanmar in a fiercely competitive contest decided on October 1 last year.

The Central Bank of Myanmar announced last week that Maybank and Japan’s Mizuho Bank had both secured full licences to open branches starting on August 3. Maybank held a ceremony yesterday at its office in Sule Centrepoint to mark the opening.

Senior executive vice president and group chief strategy officer Michael Foong said that Maybank’s DNA has been that when it enters a country or a region, it does so for the long term.

Initially, the key segment the bank will serve will be its corporate customers, focusing on trade finance and the flows of business between Myanmar and the rest of ASEAN.

“That is a big area where [companies] look for support in letters of credit, they look for support in being able to connect them with companies in Malaysia, Singapore and Indonesia,” he said.

“We believe that that [cross-border flows between Myanmar and ASEAN] will increase significantly in the near term, not in the long term, we are quite bullish about that.”

Maybank is also looking to finance foreign investment entering Myanmar over the coming years.

“That really will be our focus and we think that will keep us plenty busy over the next two years, before we start bringing in new types of products into Myanmar,” he said in an interview yesterday.

Maybank is the only bank in the world with branch offices in all ten ASEAN member states. With total assets of 640 billion ringgit (US$166 billion) and a market capitalisation of 85.5 billion ringgit according to its 2014 annual report, it also claims to be Southeast Asia’s fourth largest bank by assets.

Mr Foong said the bank’s home markets are Malaysia, Singapore and Indonesia, as well as growing operations in China and Hong Kong. He added that the bank’s clients will want support when investing in Myanmar.

Authorities have also taken what is clearly a phased approach to opening up the financial services landscape in Myanmar. Mr Foong said the bank licences for foreign branches is a good first step.

The licences given by the Central Bank of Myanmar to the nine foreign banks contain a number of limits. They can only have one branch, can only lend directly to foreign companies and must have minimum registered capital of US$75 million.

Still, the foreign banks say the market will develop over time.

“To be frank, the low-hanging fruits are really about corporate customers, corporate customers we have in the rest of ASEAN we have wanting to connect here in terms of trade and credit,” he said.

As the market develops and rules evolve over the new few years, Maybank may do business with smaller enterprises, with the business banking customers, and ultimately with retail customers.

Maybank vice president and Myanmar country head Abdul Malek Mohd Khair said that the banks has clients interested in some of Myanmar’s main sectors, including fisheries, telecoms, power, and specific real estate such as hotels, serviced apartments, retail and office space – though not condos at the moment. “These are our initial target segments,” he said. “As we progress we will look at the other type of customers.”

He added that Maybank has agreements with 14 local banks. “We don’t have exclusivity with any local bank, because we here are to participate in developing Myanmar banking, so we will work with all our correspondent banks including the Central Bank,” he said.

Local banks also face a maximum 13 percent interest rate on loans. Maybank, like all foreign bank branches operating in Myanmar, does not face this cap on dollar loans, though does on kyat loans.

Foreign banks will also have to work out how, in practice, to take land as collateral.