Maybank

President and CEO’s Statement

Dear Shareholders,

2012 was a great year for Maybank. We raised the bar Groupwide, posting a record net profit, expanding our regional reach, strengthening our fundamentals, and further embedding a service ethos driven by our core values.

Maybank is now the most valuable company listed Bursa Malaysia with a market capitalisation of RM77 billion (or USD25 billion); and one of the top banking groups in Southeast Asia with total assets of RM495 billion (more than USD150 billion).

Delivering Results

In turbulent global economic conditions, we delivered healthy growth. PATAMI rose 17.6% year-on-year new high of RM5.74 billion and nearly all our business sectors both at home and abroad reported higher revenue growth than in 2011.

Overseas profit before tax (PBT) generated 30% of the Group total, demonstrating the success of our international expansion. Maybank Singapore's PBT crossed the RM1.0 billion mark, and Indonesia's BII's PBT hit RM526 million.

Meanwhile, Maybank Islamic kept its lead in the Malaysian market, with PBT surging 24.9% to RM1.19 billion, and financing advancing 18.3% to RM62.0 billion.

Group loans grew 12.2%, with domestic loans also climbing 11.8% - above the industry. There was good news about asset quality too. Our Net Impaired Loans ratio dropped to 1.09% from 1.86% in 2011, and Loan Loss Coverage improved to 105.6%.

To minimise compression in Net Interest Margin (NIM) we chose a more conservative growth plan. The strategy paid off. Although our 12.9% total financial assets growth was slightly below the target of 15.2%, our NIM stabilised at 2.41%.

In 2012, we achieved a 16.0% ROE, surpassing our target of 15.6% and providing excellent shareholder value creation. Our shareholders' funds of RM42.2 billion and capital adequacy ratio of 17.2% (assuming 85% reinvestment rate) are among the highest in Malaysia and, all in all, the Group's fundamentals are thoroughly robust.

"Group Loans Grew 12.2%, With Domestic Loans Also Climbing 11.8% - Above The Industry. There Was Good News About Asset Quality Too. Our Net Impaired Loans Ratio Dropped To 1.09% From 1.86% In 2011, And Loan Loss Coverage Improved To 105.6%."

Transforming The Business

The past years' record-breaking results underline the success of our transformation journey. In 2010 we restructured the Group into three pillars to form the new "House of Maybank": Community Financial Services (CFS), Global Wholesale Banking (now known as Global Banking - GB) and Insurance and Takaful. Our transformation initiatives have empowered collaboration both between sectors and across the region, and we are now maximising resources to deliver exceptional customer value. What is more, as synergies develop across the Group, I see the impetus of our transformation intensifying.

In 2012 we scaled up our efforts to humanise financial services across Asia and to differentiate ourselves from our competitors. We focused especially on three areas:

Providing People with Access to Financing

Everywhere we operate we are strengthening our distribution capabilities, especially enhancing the branch experience for customers. In 2012, I am delighted to report that this earned us recognition as Malaysia's Most Valuable Brand by the Association of Accredited Advertising Agents of Malaysia. Meanwhile, we developed our presence across Southeast Asia with local incorporation in Cambodia and new offices in Myanmar and Laos. We also established a second branch in China.

Fair Terms and Pricing, and Advising Customers Based on their Needs

We invested in infrastructure and skill-sets that enable us to serve our clients more effectively. We are rapidly evolving to cater to the needs of our regional clients, and our branches are becoming more efficient as we improve front-end capabilities and enhance staff knowledge – especially in core operational and product areas.

Being at the Heart of the Community

In 2012, we issued a global-wide challenge to our employees to come up with an original and creative initiative that would make a positive difference in the lives of their chosen community. Thousands of Maybankers exemplified our corporate responsibility values by leading a host of community and environmental programmes. I am proud to say that our Maybankers went above and beyond what was expected of them.

Achieving Objectives

In line with our vision of being the regional financial services leader by 2015, we made huge strides towards all of our five strategic goals during the past year.

Strategic Objective 1

The Undisputed No.1 Retail Financial Services Provider in Malaysia

Community Financial Services flourished despite tough market conditions. Our market share in the consumer and household segments rose to 17.0%. Our share of total retail deposits is now 18.3%, and we lead the pack in retail Current Accounts & Savings Accounts and the Fixed Deposits segment – a testament to the strength of our network. I am very optimistic that our transformation initiatives will put us further ahead by 2015.

Strategic Objective 2

The Leading ASEAN Wholesale Bank

Working across ASEAN to fulfil complex client needs, GB did a string of impressive domestic and regional deals. These included IPOs, mergers & acquisitions, private placements and project financing. These successes are a clear reflection of GB's highly effective collaboration with colleagues in Client Coverage and Maybank Kim Eng.

Maybank's Position in Malaysian League Tables

	2012				2011
	Industry Rank by Value	Market Share	Total Value (RM bil)	Deals/Issues	Industry Rank by Value	Market Share	Movement of Ranking
M&A1	1	36.5%	46.6	30	2	34.6%	+11
Equity & Rights Offerings1	2	19.7%	6.2	11	2	15.9%	0
Debt Markets – Malaysia Domestic Bonds1	2	25.6%	30.2	170	2	27.1%	0
Debt Markets – Malaysia Ringgit Islamic Bonds1	2	27.7%	26.5	159	2	22.2%	0
Equity Brokerage2	2	7.1%	57.6	-	5	6.5%	+3

Source:
¹ Bloomberg   ² Bursa Malaysia

Strategic Objective 3

A Sustainable Champion for Insurance and Takaful

In line with its Vision to be the undisputed leader in Malaysia, the combined Etiqa Insurance and Etiqa Takaful entities are already leading in terms of market share for the life insurance & family takaful and general insurance & general takaful segments – a position they have maintained since 2008. In 2012, Etiqa Insurance and Etiqa Takaful exceeded the RM5.0 billion gross written premium mark for the first time.

Strategic Objective 4

A Truly Regional Organisation

With a presence in all ASEAN countries, and an enhanced focus on Greater China after opening our new Beijing branch, our franchise across the region is building new momentum towards our aspirations to derive 40.0% of Group PBT from international operations by 2015. More trans-national employee assignments will drive the realisation of the synergies we know we can achieve from being more regional.

Strategic Objective 5

A Global Leader in Islamic Finance

In 2012 Maybank Islamic's PBT topped RM1.0 billion for the first time. Pursuing our Islamic First strategy across our retail and corporate banking franchise has propelled Maybank Islamic to pole position in the Malaysian market. The strategy is reinforced not just by close collaboration with CFS and GB but by our Islamic Finance Centre of Excellence, which provides visionary ideas and astute advice on innovative Shariah structures.

Prospects for Islamic banking are excellent as just over 40% of ASEAN's 560 million population is Muslim and penetration is still low. In Indonesia, we are fast expanding our Islamic universal banking products and services, and in Singapore we are implementing a range of Shariah compliant retail and treasury solutions.

* Unaudited

Boosting Capital Adequacy

During the year we strengthened our capital base by raising RM3.66 billion in equity. The proactive private placement of 412 million shares (4.9%) at RM8.88 per share in September 2012 – the largest in Malaysia's corporate history – was quickly taken up by both local and foreign institutional investors, reflecting solid investor confidence in Maybank. We will use the funds to bolster our growth, especially in Indonesia, the Philippines and other regional markets.

Looking Ahead

With solid momentum generated in 2012 and positive macro economic conditions across our home markets, I am confident of another strong financial performance in 2013. But we remain prudent, too, and – given the higher capital requirements of Basel III – the Board has set a headline KPI of 15.0% ROE on the enlarged capital base.

In 2013, we will accelerate our transformation and sharpen our focus on our five strategic goals. We will strengthen our performance, manage expenses prudently, and grow profitably and responsibly. We will raise the tempo of our regional expansion and build our resources regionwide. And we will continue to leverage on our operations regionally, ensuring we remain agile in grasping opportunities.

These objectives are encapsulated in our three key strategic priorities for 2013:

Raising the Tempo for Regionalisation

We will harvest value from our regional initiatives. We will speed up the transformation programme in Indonesia, develop a new growth strategy in Singapore, grow our Philippines operations, and explore the feasibility of local incorporation in China. At the same time, we will increase our network and human capital in growth markets.

Accelerating the Move to a High Performance Culture

We will step up our emphasis on training, job rotation and international assignments. We will further strengthen performance management and rigorously implement and track productivity metrics throughout the Group. We will uplift professional standards Groupwide to escalate a sense of urgency and accountability and to underscore proactive issue resolution. And we will expand risk-based pricing across key products and segments.

Enhancing the Cost Structure

We will extend cost optimisation efforts and kick-start cost restructuring initiatives across the Group. We will forge ahead with communications and cultural change to embed a cost-conscious culture. We will enable cost savings by more frequent and automated measurements. And we will drive continuous improvements in efficiency and effectiveness through business process improvements.

Appreciation

In 2012, I have seen Maybankers from across the region initiating and leading change, with teams taking responsibility for delivering results. I offer all Maybankers my thanks for the part they are playing in the transformation of the Group.

I am also profoundly grateful for the steadfast support provided during the year by members of the Board of Maybank and other entities within the Group, as well as our partners, customers and shareholders. And I deeply appreciate the guidance we received from Bank Negara Malaysia, Securities Commission Malaysia, the Monetary Authority of Singapore, Otoritas Jasa Keuangan, Bank Indonesia, Bangko Sentral ng Pilipinas and the other regulatory authorities in countries where we operate.

Thank you!

DATO' SRI ABDUL WAHID OMAR
President & CEO