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3 Useful Things That Investors Need To Know About This Bank

Investors or potential investors interested in the local banks, namely, United Overseas Bank Ltd (SGX: U11), DBS Group Holdings Ltd (SGX: D05) and Oversea-Chinese Banking Corp Limited (SGX: O39) may be interested in this bank – Malayan Banking Berhad (KLSE: MAYBANK), which is a major player across the Causeway

Valuation:

Maybank, the biggest bank in Malaysia by asset size, has currently seen its market capitalisation surpassed by its local peer, Public Bank Berhad (KLSE: PBBANK).

This happened because as Public Bank gained 12% during the last 12 months, Maybank lost 11% of its value.

The last time when Public Bank’s market capitalisation surpassed that of Maybank was during the great recession of 2008/2009.

Cost-to-income ratio:

The cost-to-income ratio is a measure of how efficient a bank manages its cost. The lower the cost-to-income ratio, the more efficient the bank.

In the last 5 years, Maybank’s cost-to-income ratio has ranged from 48% to just below 50%. To put this number into perspective, DBS Group had a ratio of 45.4% in 2015, whilst Public Bank’s ratio was 30.5% in 2015.

Return on equity (ROE):

ROE measures how well a company generates profit on shareholders’ equity. In other words, the higher the ROE, the higher the return to shareholders.

the table below shows Maybank’s ROE for the last 5 years. To put that into perspective, the ROE for with another Malaysian bank, CIMB Group Holdings Bhd (KLSE: CIMB), is shown too.

5

Source: Author’s Calculation

From the number above, we can see an obvious trend. Both banks have seen a decline in ROE for the last 5 years. Nevertheless, Maybank seems to have performed “better”, by declining at a slower rate.

Nevertheless, it is important to remember that both banks have a different focus. While Maybank is inclined towards retail banking, CIMB Group has a major focus on investment banking.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.