Maybank BHD Financial Performance Analyis

May fix BHD Financial Performance AnalyisCHAPTER 1INTRODUCTION output signal or gain from a fiscal formation is depending on al to the highest degree(prenominal) issues whether the external control or the inborn control. External control call down to the environment in our bea like economy growth and puffiness that effect the purchasing power of node as the price of goods augments, customer demand leave behind accession too. The Malaysian economy actually moves in concert with strong monetary system. Strong fiscal system of a c paltrynish impart contribute to economic growth. Economic growth of a earth like Malaysia is measured in scathe of true GDP. According to excursion Document Systems (1996) ,since independent on 1957 until 2005, Malaysian economy had grew by 6.5% per social class automatically it become the best country in Asia at that judgment of conviction.Banks forthwith struggled to primary(prenominal)tain a good deed in order to take on its intent s of satisfying their customers, employees, depositors and government according to Askari Commercial Bank ( 2006 ). The evolution of pecuniary system in Malaysia has been signifi commodet. 7.2 per cent economic growth registered by the country last year was the highest achievement over 10 years and was ope regularise by the two stimulus packages as well as the guidance of countrys financial and deponeing system by Bank Negara said the Prime take c be Datuk Seri Najib Tun Razak (2011) .1.1 BACKGROUND OF STUDY realize is the major(ip) focus of why everybody struggles to shuffling sure their business going well as profit is the burning(prenominal) sources of funds. This musical composition go away measure financial exercise of May aver Bhd and determinant of data by identifying the gainfulness feat of Maybank Bhd. It is important to understand the profitability of mercantile bank aft(prenominal) considering certain parts that may contribute to the profitability. The look into is establish on the exploit of Maybank from 2001 to 2010.1.2 PROBLEM STATEMENTA financial institution is a profit- take heedking organization owned by sh beholders who expect to gain contain with the risk touch ond that they have to face. at that place ar many factors that contribute to bank profitability. According to Bankers Journal Malaysia, for Malaysian Banks, more than 80% of their total income is attributed to bear on income. Previous studies have to a fault found that wager mathematical group income and non- engage income have a positive effect on bank profitability. However besides those banking characteristics of internal proteans, there are whatsoever external variable that may have-to doe with the banks profitability functioning that cannot be overemphasized like puffiness and GDP.Earlier studies by Al-Hajji, Mohsen (2003) have found positive kind in the midst of the GDP and bank profitability. When GDP increases, profitability of the bank leave alone increase too. Adverse leave was found about consanguinity in the midst of ostentation and bank profitability. This ruminate will answer the question of how bet income, non- bear on income, GDP and pomposity tempo relate with bank profitability also how is well is the work of Maybank Bhd during the menstruum of subscribe to.RESEARCH QUESTIONDependent and independent variables are studied to come about solution about the profitability performance of Maybank Berhad. Factors touch performance of Maybank Berhad can be comprises into external and internal factors. The criteria that will be judged are interest income, non-interest income , interest set downs, piggy Domestic carrefour (GDP) and inflation target. The intent of this take in is to psychoanalyze the effect of all this factors towards performance of Maybank Berhad. This research problem leads to questions concerning kinship between selected criteria.In this research, there are a few(prenominal) quest ion were asked as listed below 1.3.1 To what extend inflation regulate effect the performance of MaybankBerhad?What are the relationship between dependent variable andindependent variables ?1.3.3 What is the factor that most effect profitability ratio of Maybank Berhad?1.4 OBJECTIVE OF STUDYThe main objective of this resume is to study the factors attributes to the profitability performance of Maybank Bhd. comprises of interest income, non-interest income ,Gross Domestic product (GDP), and inflation ordinate. The study also will suss out the profitability performance of bank for 10 years period. isolated from that, there are few supporting objectives to support the main purpose were listed below To study the relationship between internal variables and bank profitability.To identify whether bank cost and bank revenues will contribute toprofitability performance of Maybank Bhd.To determine which factors contribute the most to profitability of MaybankBhd.To analyze the trend of M aybank profitability over 10years andidentify Maybanks susceptibility and weaknesses apply certain profitability ratios.SIGNIFICANT OF THE STUDYBank remuneration refer to the buffet on invested capital and it is important to company as well as the shareholder. Bank profits can be considered as benefit to depositors as it shows stronger, safer and efficient banking system in the increases in revenues and function improvements. In luffly borrowers also will get the benefits since the bank lending rate depends of ability of banks capital accounts. This constitution will focus on some categories as followsFacilitate researcher to find out the major factors lend to the profitability performance of commercial banks oddly Maybank Bhd.To assist the researcher to be more alert on how to manage and overcome problems that could come unneurotic with independent variables and domiciliate describes on how to improve profitability performance.Also set up information on banks profitabili ty strength and weaknesses that could be use by the customers as an evaluation of banks performance.The researcher may also view the performance trend of Maybank Bhd. during this 10 years from 2001 to 2010.1.6 SCOPE OF STUDYThis research paper will focus on the financial performance of Maybank Berhad based on banks profitability. The factors that will be adjudicate are divided into 2 which are external factors (Gross Domestic Product, and inflation) and internal factors ( interest income, non-interest income ).1.7 LIMITATION OF STUDYThe chokeations of this study is the data only for 10years starting 2001 to 2010. Furthermore the data come from inessential data and sometimes may be adequate or accurate. likewise most of the data were gathered from journals, BNM Maybank annual reports , and articles.1.8 DEFINITION OF TERMS1.8.1 ProfitAccording to Wikipedia, profitcan be considered as the difference between the purchasepriceand thecostsof bringing to securities industry whatever it is that is accounted as an enterprise or in a simple word it factor money gained in business.1.8.2 Interest IncomeCompanies sometimes keep their hard cash in short-term deposit investments such as certificates or deposit with maturities up to twelve months, savings account, and money market funds. The cash placed in these accounts earn interest for the business, which is recorded on the income logical argument as interest income. Interest income will fluctuate each year with the amount of cash a company keeps on hand and the familiar level of interest rates as set by the Federal Reserve.(Source Joshua Kennen Investing for beginners guide )1.8.3 Operating profitThe profit take in from a firms normal midpoint business operations. This value does not include any profit earned from the firms investments (such as earnings from firmsin whichthe company has partial interest) and the effects of interest and assesses. It is alsoknown as earnings before interestand tax (EBIT).(Sour cehttp//www.investopedia.com/terms/o/operating_profit.asp)1.8.3 Profitability AnalysisAnalysis that assigns revenues and costs to major customers or groups of customers rather than to organizational units, products, or other objects. The results may direct organizational resources toward more profitable uses. It is an application of segmented reporting in which a customer group is treated as a segment. It is especially helpful when combined with an activity-based costing approach that determines which activities are performed for each group and assigns costs based on appropriate drivers. (Source http//www.answers.com)1.8.4 pompousnessInflation is An increase in the amount of currency in circulation, resulting in a comparatively sharp and sudden magnetic dip in its value and rise in prices it may be caused by an increase in the volume of paper money issued or of gold mined, or a relative increase in expenditures as when the supply of goods fails to meet the demand. (Source Webst ers New Universal unabridged Dictionary)1.8.5 Financial RatiosRatios that measure a firms ability to meet its short-term financial obligations on time, such as the ratio of current assets to current liabilities. (Source The forgive Dictionary by Farlex )1.8.6 Gross Domestic ProductGross internal product (GDP) refers to the market value of all goods and services produced within a country in a attached period. It is often considered an indicator of a countrys standard of living. Gross municipal product is related to national accounts, a subject in macroeconomics. ( Source http//erbwikipedia.org/wiki/Gross_domestic_product ).Interest ExpenseInterest expense is a non-operating or other expense for the cost of borrowed money or other credit. The amount of interest expense appearing on the income statement is the cost of the money that was used during the time interval shown in the heading of the income statement, not the amount of interest paid during that period of time. (Source Accounting Couch) abstractIn this chapter, we have discussed about the influence of factors affecting profitability performance of Maybank Berhad and the question that need to be answered in this paper. This research examined the bank profitability which focused on both the returns on bank assets and equity, net interest rate margins and net operating margin. High performance comes from effort given by bank management to produce high profit go facing risk related. Firm need to generate income as frequently as possible as banking institution is a profit-orientation company.CHAPTER 2 publications REVIEWINTRODUCTIONBank performance depends on the profitability measuring rod of banks financial statement. It is recognized that the growth of the banking system is dependent on a strong and stable economic instruction.PREVIOUS STUDYThis paper deals with performance of commercial bank, focuses on Maybank Berhad. Some of previous study that relate with this research are Masood et al. (20 09) revealed that in case of calculating profitability in terms of ROE or ROA the most evidentiary internal and external factors affecting Saudi banks are capital adequacy ratio, earning assets to deposits ratio, operational efficiency, growth rate in GDP, and banking sector development. He finds also that variables to do with credit risk, inflation rate and interbank offered rate are insignificant and have a low effect on all indicators of profitability. The results in the speech by tan Sri Dato Ali Abu Hassan Bin Sulaiman, Governor of BNM, (23 September 1998), he stated that since the onset of the financial crisis, BNM had instituted a number of measures , amongst others included tighter loan classficication policy for non-performing loans and a limit on lending for the purchase of shares. Since then, the financial crisis adversely affected the real economy, resulting in real GDP contracting by 4.8% during the first fractional of 1998. Year 1998 was a difficult year for the ban king system while 1year after that was the recovery year in the performance of banking system. (BNM 1999 Annual Report recommend Conference).Haslem (1968) defined profitability as the capacity to gain or profit, or to return a profit or income. Profit is the measured for fatty capacity of a company. According to Orl and Yolalan(1990), profitability performance evaluation of a banks should be linked to decision model so as to associate the result obtained with the decision. Meanwhile, according to Bashir and Hassan , (2003) on their study on the factors influencing the profitability of Islamic banks in eight Middle Eastern countries for the period 19931998, they find that the high leverage and large loans-to-asset ratios lead to higher profitability. This study also indicates a positive relationship between macroeconomic variables, stock market development and profitability of banks.Ben Ben Naceur and Goaied (2006) they find that macroeconomic indicators like inflation, GDP, and market concentration ratio have no impact on banks interest margin and profitability. However, financial structure variables (stock market capitalization divided by total assets or GDP) do have a positive effect on the return on assets. Staikouras and Wood (2003) said that macroeconomic indicators (variability of interest rate, growth of GDP) had a negative impact on profitability. Chance and Lane 1980, and Sweeney and Warga 1986 find microscopic evidence that supports the interest rate sensitivity of bank or financial institutions stock returns. On the other hand, studies such as Lynge and Zumwalt 1980, Booth and police officer 19851, Scott and Peterson 1986, and more recently Chaudry and Reichert 1999 suggest that the stock returns of financial institutions are highly sensitive to changes in interest rates.Different result from Kosmidou and Pasiouras (2007) which they examine how a banks specific characteristics and the overall banking environment affect the profitability of com mercial domestic and foreign banks operating in the 15 EU countries and they found that the main determinants of profitability measured by ROAA, macroeconomic conditions (inflation, growth of GDP) and financial market structure (stock market capitalization to total assets or to GDP, total assets to GDP) are statistically significant and related to both domestic and foreign banks profitability.Apart from that, Bourke (1989), Heggested (1977) utilize the consumer price index (CPI) as a proxy for inflation both of them made a research on relationship between profit and inflation and the result, both studies found that inflation had a significant relationship with profit. Earlier study from Revell (1980). believed that inflation could be a factor in the causation of variations in banks profitability. For studied on total expenses, items that fall within the control of bank management can be by and large divided into 3 categories staff expenses, provision for loan losses, and other gen eral expenses. Expenses, such as payment for income tax, are considered statutory expenses and hence beyond the control of management. Devinaga Rasiah (2010) .THEORETICAL FRAMEWORKIn this study, 4 factors were elect to be evaluated. They are return of unit trust fund, risk level of unit trust, diversification level and last but not least is risk-adjusted level. infra is the relationship between dependent variable and independent variables.Title investigation of The Financial Performance of Maybank BerhadBank interest incomeBank Non-Interest IncomeGDPInflation rateBank ProfitabilityInterest ExpenseDEPENDENT variable quantityINDEPENDENT VARIABLESCHAPTER 3METHODOLOGY AND info3.0 INTRODUCTIONThis study will analyze the relationship between dependent variable (profitability of Maybank Bhd) and independent variables (interest income, non-interest income, inflation rate and Gross Domestic Product (GDP) ).This study will cover 10 years data from 2001 until 2010 and will be done victimiza tion Statistical Package For Social Science (SPSS). Furthermore, hypothesis will be tested whether it can be accepted or rejected. This will provide more understanding view among variables. The advantage of using profitability ratios is that they are inflation invariant that is they are not affected by changes in price levels. This is useful in a time series abstract such as this, where the real value of profits may be distorted by the time varying inflation rates as stated by Devinaga Rasiah (2010).3.1 DATA COLLECTIONData was collected using annual reports of Maybank Bhd. The data collection was compiled from the financial statement also the oddment sheets from Maybanks annual reports for 10 years.. All the data will be evaluate accordingly to see the relationship between the dependent and independent variables also to test the hypothesis. Besides some of the data comes from Internet website like characterisation on news and some articles which contain information about Maybank Bhd.3.2 try FRAME10 years data was chosen as to see the latest profitability performance of Maybank Bhd. 10 years data is seemly to show the flow of performance of bank to see whether it has consistent performance or not and factors which relate the most to banks performance can be determine.3.3 SOURCES OF DATAThe data on Maybank Berhad financial statements and balance sheets were collected using secondary data which come from(BNM) Bank Negara Malaysia Annual Reports (2001 until 2010).Bursa MalaysiaInternet Website. subroutine library books, articles and magazines.3.4 VARIABLES AND MEASUREMENTThe variables used in this study can be categorised into two main types which are, the dependent and the independent variables.3.4.1 Dependent VariablesThe dependent variable for this study is the profitability performance of Maybank Bhd.3.4.2 Independent VariablesThere are 4 independent variables in this study which are interest income, non-interest income, inflation rate and Gross Domestic Product(GDP).RESEARCH DESIGNResearch design involves a series of rational decision making choices. Various issues regarding the topic will be describe here including purpose of study, types of investigation to be make, time horizon and so on.3.5.1 Purpose of the StudyThe purpose of this study is to determine the profitability performance of Maybank Bhd from 2001 to 2010. Besides, this study attempt to analyze the factors relates with the performance of Maybank Bhd. and what are the factor that has the highest impact on Maybank Bhd performance.3.5.2 Types of InvestigationThis study involved the multiplex regression study on the data from range of 2001 until 2010. This model was chosen because this study has more than 1 independent variable..3.5.3 unit of measurement of AnalysisUnit analysis for this study are interest income, non-interest income, inflation rate and GDP.3.5.4 clock time HorizonThis study will use range data from 2001 until 2010 of Maybank Bhd.3.7 DATA ANALYSIS AND TREATMENTThis study use SPSS, multiple regression study as the statistical tool as to measure how all these variables will influence profitability performance of Maybank Bhd. The multiple regression study will be used to analyze the relationship between dependent variable, which is the profitability of Maybank Bhd and independent variables which includes interest income, inflation rate, GDP and non-interest income.Multiple Linear reversal ModelGeneral FunctionsP = f( Inflation rate, interest income, Non-interest income , GDP, e )particular proposition Form of EquationP = a + b1X1 + b2X2 + b3 X3 + b4GDP + b5INF +WhereP = profitabilitya = Constantb1, b2, b3, b4 = Coefficient Beta valueX1 = interest incomeX2 = non- interest incomeGDP = Gross Domestic ProductINF = Inflation= Error3.8 HYPOTHESIS STATEMENTThere are 5 hypotheses in this study which areHypothesis 1H0 There is no significant relationship between inflation rate and bank profitability.Hypothesis 2H0 There is no significant r elationship between GDP and bank profitability.Hypothesis 3H0 There is no significant relationship between Interest Income and bank profitability.Hypothesis 4H0 There is significant relationship between Non-Interest Income and bank profitability.SUMMARYIn this chapter, we have discussed about where the data comes from and how the data will be measures to evaluate the significances between dependent variable and the independent variables. The study is designed to examine 5main areas which are interest expense, interest income, non-interest income, inflation rate, and Gross Domestic Product (GDP). 10 years data from varieties of secondary sources like Bank Negara Malaysia and earnings sources will be evaluated to explain the relationship between profitability performance and factors influence it..