Malaysia: Banking Industry Primer
July 2014
Malaysia: Banking Industry Primer Overview For the Malaysian banking industry, the last decade was largely a period of steady growth. It saw increase in the number of banks and branches, in tandem with the country’s stable economic growth. With the advent of modern technology in banking, Malaysian banks, along with their customers, have embraced advanced systems and processes. This has fuelled growth of electronic payments, e-banking as well as mobile banking in the country.
Malaysian Banking Industry Amidst the volatility in the markets globally, the Malaysian banking industry has grown in size over the recent years with developments seen across various fronts both in commercial banking and Islamic banking. Malaysian total banking assets grew at a compounded annual growth rate (CAGR) of 10.3% during 2009-13. According to its central bank, Bank Negara Malaysia (BNM), the country houses 55 licensed banking institutions, of which 27 are commercial banks, 16 are Islamic banks and 12, investment banks.
Total Assets, 2009-13 (MYR Bn)
Assets Distribution of Banking System, 2013
2,500 Investment Banks 3%
2,000 1,500 1,000 1,392
1,514
2009
2010
1,744
1,882
2011
2012
2,059
Islamic Banks 21%
Commercial Banks 76%
500 0 2013
Source: Bank Negara Malaysia (BNM)
As of December 2013, total assets held by banking institutions in Malaysia increased by 9.4% Y-o-Y. Commercial banks, which constituted the largest segment of banking system and accounted for 76% of the total banking assets in 2013, reported a 7.4% Y-o-Y growth in their assets. Investment banks registered a decline in total assets, down 9.2% Y-o-Y, while Islamic banks recorded a robust 15.3% increase in their asset base.
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Market Share by Total Assets, 2013 Malayan Banking Berhad, commonly known as Maybank, is the largest domestic bank of Malaysia in terms of asset size. It accounted for approximately 27% of total commercial banking assets as at the end of December 2013. Public Bank and CIMB were the second and third largest commercial bank, with a market share of 12% and 11%, respectively.
Maybank 27% Others 41%
Public Bank 12% Hong Leong Bank 8%
CIMB 12%
Source: BNM and Company Annual Reports
Total Loans, 2009-13 (MYR Bn) Total loans of the banking system grew at a CAGR of 11.8% during 2009-13. The growth was mainly driven by growing domestic consumption together with low inflation and rising per capita income in the country. Housing loans, which accounted for 27.2% of the total loans in 2013, grew at a CAGR of 13.7% during 2009-13.
1,400
1,200 1,000 800 600 400
783.5
883.3
2009
2010
1003.5
1108.0
2011
2012
1225.7
200 0
Source: Bank Negara Malaysia (BNM)
2013
Islamic Banking in Malaysia Malaysia’s Islamic finance industry has been in existence for over 30 years. The Islamic Banking Act 1983 enabled the country’s first Islamic Bank to be established, and with liberalization of the Islamic financial system, more Islamic financial institutions followed. According to BNM, the Islamic banking assets in Malaysia stood at MYR426.4 Bn as at the end of December 2013.
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Islamic Banking Total Assets, 2009-13 (MYR Bn) 450 400 350 300 250 200 150 100 50 0
219.8
253.5
2009
2010
320.5
2011
367.7
2012
426.4
In terms of annual assets growth, Islamic banking sector continues to outperform the conventional banking sector. During 2009-13, Islamic banks’ annual assets registered a CAGR of 18%, in comparison to the conventional banks’ 9.1%.
2013
In 2013, Malaysian Islamic banking assets accounted for 20.7% of the total banking assets, and the share is expected to reach 25% in 2014 and 40% by the end of 2020.1
Source: Bank Negara Malaysia (BNM)
"The government’s seriousness in empowering and raising the standards of the Islamic financial system can been seen from various governing and legal initiatives."
– Datuk Seri Najib Razak, Prime Minister, Malaysia
Digital Banking in Malaysia Banks in Malaysia are sharpening their focus on adapting services to meet the demands of an increasingly tech-savvy consumer. Internet banking penetration rate in Malaysia has increased drastically from 28.9% in 2009 to 51.8% in 2014, covering almost half of the population. Almost 98% of internet banking subscribers are individuals, while only 2% are corporate. Malaysian banks are taking various initiatives to increase the usage of online banking. In 2012, the Malaysian government and BNM laid down a financial sector blueprint, which aims to grow Malaysia’s epayment to 200 transactions per capita by 2020 from 56 transactions per capita recorded in 2012. In line with this initiative, BNM announced that banks in Malaysia will offer at least one internet banking kiosk at all their branches nationwide to enable the public access to online banking and interbank GIRO (IBG) services by March 2014. Similarly, with smartphone penetration in Malaysia at about 63%, explosion of new devices is driving change in consumer demand and behavior. Though currently the number of subscribers for mobile banking is small, it is expected to grow in the future with high adoption of smartphones.
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According to Wasim Saifi, CEO of Standard Chartered Saadiq Bhd
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Internet Banking Subscribers
Mobile Banking Subscribers
(MYR Bn)
(MYR Bn)
20
51.8%
46.3% 34.4%
40%
28.9%
10 5
8.1
9.8
11.9
15.5
20%
3
8%
0% 2009
2010
Total Subscribers
5.4% 2
10% 1
0 2011
2012
2013
Internet Banking Penetration %
10%
8.3%
30% 13.7
0
14% 12%
50% 4
41.0%
15
12.7%
60% 5
2.4%
3.79
3.1%
4%
2.45 1.56
0.67
0.90
2009
2010
6%
2% 0%
Total Subscribers
2011
2012
2013
Mobile Banking Penetration %
Source: Bank Negara Malaysia (BNM)
“The increasing sophistication in the financial services sector, notably banking, requires technological advancement to facilitate transactions. Along with the advancement of technologies in this era of smartphones and phablets, the marrying of banking services and technologies in Malaysia is developing by leaps and bounds.” – Datuk Ahmad Maslan, Deputy Finance Minister, Malaysia
Key Digital Banking Initiatives in Malaysia Bank Name
Initiative
CIMB Bank
It launched Kwik Account, the first account that can be opened online without visiting a bank branch in Malaysia and is instantly activated upon successful application. It also introduced Kwik Money Transfer, which allows all CIMB Bank savings and current account holders who have signed up for CIMB Clicks, the internet banking platform, to send money to a recipient’s Malaysian mobile number or email address.
Hong Leong Bank
It launched mobile banking services with Kony Solutions, Inc., a mobile application platform provider, to provide transactional mobile banking app on Apple iPhone iOS, Google Android OS and RIM BlackBerry OS. The new mobile banking app will also introduce payment service called Payment Express (PEx), a social payment feature to demonstrate new possibilities by offering customers the flexibility to pay anyone instantly via
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Bank Name
Initiative their smartphones to any mobile number.
Public Bank
In May 2014, Public Bank Bhd launched its new Internet banking website ‘PBe’ to increase the customer base and promote e-banking. The new website was designed and developed with the objective of showcasing a bright, bold and contemporary webpage featuring responsive web design for optimal viewing where information displayed will automatically fit across a wide range of computers and mobile devices such as tablets and smartphones.
Conclusion The outlook for the Malaysian banking industry is optimistic owing to the steady economic growth and rising per capita income. The emergence of Malaysia as an Islamic banking hub will further uplift the growth of this sector. The government’s initiative to increase digital banking will further add to this growth.
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