3.1 INTRODUCTION
In this chapter, the researcher will look at the history of Maybank group as a whole besides that, the researcher will also review and analyze the performance of Maybank group and also Islamic product that been offered by Maybank Islamic Berhad.
COMPANY HISTORY
3.2.1 Maybank
Maybank was incorporated on 31 May 1960 and began operations on 12 September in the same year, rising from the spirit of Independence to pave the way for dynamic change in the country’s banking and financial landscape. Our founders were visionary in their desire to see Maybank grow to excel both in the domestic market and in the region.
Over the years, Maybank has led an aggressive drive to expand network and maximize reach. The Group has consistently set new benchmarks in product and service delivery by achieving many firsts in the industry such as rural credit scheme, cards services, corporate and investment banking, mobile banking services, internet banking and Islamic banking.
Maybank operates through an extensive network of over 1,700 offices in 14 countries including 7 in South East Asia. The Group is represented in the major financial centres of London, New York, Hong Kong and Singapore.
3.2.2 Maybank Islamic
Maybank Islamic Berhad, a wholly-owned subsidiary and the Islamic banking arm of the Maybank Group, is the largest Islamic bank in Malaysia. It started its initial operations offering Islamic financial services through a window concept in 1993 and later converged to full-fledged Islamic banking operations on 1 January 2008. With a breadth of more than 17 years experience in the Islamic banking and finance, Maybank Islamic has been regarded as the leading Islamic bank in the Asia Pacific region and ranks among the world’s top 15 Islamic financial institutions.

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Today, Maybank Islamic proudly stands above its peers in the home market with Shariah-compliant assets of more than USD12 billion commanding significant market share in financing and deposits of over 24% and 21% respectively. Maybank Islamic believes that serving the needs of customers is a priority and as such it is committed to provide a wide array of Shariah-compliant financial products and services to suit its customers’ preference and choices.
Apart from commercial banking offered by Maybank Islamic, Maybank Group’s Islamic investment banking and capital market business are offered through Maybank Investment Bank and selected overseas offices in major financial centres of Bahrain, London, Singapore and the international offshore financial centre of Labuan. As an industry icon, Maybank Islamic is committed to scaling new heights as reflected in the way the Bank operates its business, the way its deliver products and services to customers and in the way the Bank engages more than 25,000 Maybankers across its home country as well as its business partners and stakeholders globally
3.3 OBJECTIVE OF ESTABLISHMENT
The objectives of the establishment of Maybank Islamic Berhad are as follows:
1. To continues as a ‘Market Leader’ in Islamic banking field in the aspect of products and services.
2. Introduced the financial product that is based on MM concept as a an alternative to current the BBA product
3. Introduced the financial product that is based on Ijarah Mutahiah Bittamlek
4. Introduced the management of investment in an Islamic way
5. Involved in asset management in an openly way
6. Introduced Islamic card credit
7. Actively involved in Murabahah commodity product
BOARD OF DIRECTORS
Dato’ Seri Ismail Shahudin
Dato’ Seri Ismail Shahudin was appointed as a Director and Chairman of Maybank Islamic on 23 January 2010. He was Chairman of Bank Muamalat Malaysia Berhad from 2004 until his retirement in July 2008. He has held senior positions in Citibank, serving both in Malaysia and New York, United Asian Bank and Maybank where he was appointed Executive Director in 1997. He left Maybank in 2002 to assume the position of Group Chief Executive Officer of MMC Corporation Berhad prior to his appointment to the Board of Bank Muamalat Malaysia Berhad. His current directorships in companies within the Maybank Group include as Director of Maybank Berhad. He serves as Chairman of the Nomination and Remuneration Committee and as a member of the Credit Review, Risk Management, and Employee Share Option Scheme Committees of Maybank Berhad.
Tan Sri Datuk Dr Hadenan bin A. Jalil
Tan Sri Datuk Dr Hadenan bin A. Jalil was appointed as a Director of Maybank Islamic on 23 January 2010. Tan Sri Datuk Dr Hadenan bin A. Jalil was Auditor General from 2000 to 2006. He served with the Government for 36 years in various capacities in the Treasury, the Ministry of International Trade and Industry and the Ministry of Works prior to his appointment as Auditor General. His current directorships in companies within the Maybank Group include as Director of Maybank Berhad. He serves as Chairman of the Audit Committee and as a member of the Credit Review, Nomination and Remuneration, and Employee Share Option Scheme Committees of Maybank Berhad.
Zainal Abidin Jamal
Zainal Abidin Jamal was appointed as a Director of Maybank Islamic on 23 January 2010. He is a practicing corporate and commercial lawyer and established his firm, Zainal Abidin & Co, in 1987, where he is a Senior Partner. He was enrolled as an Advocate & Solicitor of the High Court of Malaya in 1986. Between 1983 and 1986, he served as the Company Secretary of Harrisons Malaysian Plantations Berhad. Prior to that, he had practiced in Singapore where he was enrolled in 1980 as an Advocate and Solicitor of the Supreme Court of Singapore and had also served as a First Class Magistrate in Brunei Darussalam. His current directorships in companies within the Maybank Group include as Chairman of Mayban Trustees Berhad and Director of Maybank Berhad, a Director of Etiqa Insurance Berhad, Etiqa Takaful Berhad, Maybank International (L) Limited, and Mayban International Trust (L) Ltd.
Datuk Dr. Syed Othman bin Syed Hussin Alhabshi
Datuk Dr. Syed Othman bin Syed Hussin Alhabshi was appointed as a Director of Maybank Islamic on 30 January 2008. Datuk Dr. Syed Othamn has vast experience as an academician. He held various academic leadership and research post at International Islamic University of Malaysia, University Utara Malaysia, University Tun Abdul Razak and Institute of Islamic Understanding of Malaysia before he assumed responsibility as the Professor of Islamic Economics, Chief Academic Officer and Head of Takaful at International Centre for Education in Islamic Finance (“INCEIF”). Datuk Dr. Syed Othman is a director of Etiqa Takaful Berhad. He is also a director of Prima Prai Sdn Bhd, Epen Bina Sdn Bhd and Universiti Teknikal MARA Sdn Bhd.
PRODUCTS AND SERVICES IN MAYBANK ISLAMIC
Home Equity-i
HomeEquity-i is a shariah compliant home financing plan based on the Musharakah Mutanaqisah or diminishing partnership concept.
Maybank Islamic (“the bank”) and applicant enter into a joint ‘partnership’ with bank to raise capital for acquiring a property. Both parties become joint property owners with shares allotment based on amount of capital contributed. Maybank Islamic releases its shares to applicant who gradually acquires bank’s ownership of the property with monthly payments made over an agreed time period thereby diminishing the bank’s share till property is fully owned by applicant.
Home Fianancing -i
BBA is defined as “deferred payment sale”. BBA involves the sale and purchase transactions between the bank and the customer. Under this concept, customers may defer total payment of asset which is the property in installments over a specific period of time.
Fixed payment that shows exactly what customers need to pay throughout the tenure. useful for those working on a monthly budget.
MaxiHome-i
MaxiHome-i refers to Home Financing under Variable Rate Financing (VRF). Maxihome Loan Packages cater to the needs of individuals and small businesses, including financing the purchase of new properties, sub-sales, refinancing, redraws and remortgages. This product is applied under the concepts of Bai Bithaman Ajil (BBA).
BBA is defined as “deferred payment sale”. BBA involves the sale & purchase transactions between the bank and the customer. Under this concept, customers may defer total payment of the property in installments over a specific period of time.
ShophouseEquity-i
ShophouseEquity-i is a shariah compliant home financing plan based on the Musharakah Mutanaqisah or diminishing partnership concept.
Maybank Islamic and applicant enter into a joint ‘partnership’ with bank to raise capital for acquiring a property.Both parties become joint property owners with shares allotment based on amount of capital contributed.
Maybank Islamic releases its shares to applicant who gradually acquires bank’s ownership of the property with monthly payments made over an agreed time period thereby diminishing the bank’s share till property is fully owned by applicant.
Shop house Financing-i
A fixed rate financing for shop houses currently being practiced under the concept of Bai Bithaman Ajil (BBA), Shop house Financing-i is recommended especially for homebuyers who prefer a fixed monthly budget where you know exactly how much to pay throughout the tenure, whether by a single instalment sum or in-line with the multi-tiered rates.
MaxiShop-i
MaxiShop-i refers to Shophouse Financing-i under Variable Rate Financing (VRF). MaxiShop Loan Packages catering to the needs of individuals and small businesses, including financing the purchase of new commercial properties, sub-sales, refinancing, redraws and remortgages. The scope of commercial properties under MaxiShop includes shop houses, shop offices, commercial lots in shopping complex, office lots, factories, industrial buildings. This product is applied under the concepts of Bai Bithaman Ajil (BBA).
BBA is defined as “deferred payment sale”. BBA involves the sale & purchase transactions between the bank and the customer. Under this concept, customers may defer total payment of the property in installments over a specific period of time.
Variable Rate Financing (VRF) CASH LINE -i (OVERDRAFT)
Murabahah is another type of sale and purchase contract, with a deferred payment element. The contract of sale may take place when a buyer who wishes to purchase assets, requests the Bank to purchase assets at cost (purchase price) and in return the Bank will charge the buyer an agreed profit margin which is incorporated into the selling price. The selling price is subsequently payable on a deferred single payment.
ExeCash-i Standard
ExeCash-i Standard package is an Islamic Personal Term Financing under the Shariah principle of Bai’ ‘Inah (sale with immediate repurchase). Bai’ ‘Inah is a buy and sell contract whereby Maybank Islamic (“the Bank”) would sell its assets to the applicant on deferred payment basis. Subsequently, Maybank Islamic (“the Bank”) would buy back the same asset from the applicant at a lower price on cash basis.
Under Bai’ ‘Inah concept, Maybank Islamic will use its asset as an underlying asset for the sale and purchase transactions.
ExeCash-i Special
ExeCash-i Special package is an Islamic Personal Term Financing under the Syariah principle of Bai’ ‘Inah (sale with immediate repurchase). Bai’ ‘Inah is a buy and sell contract whereby Maybank Islamic (“the Bank”) would sell its assets to the applicant on deferred payment basis. Subsequently, Maybank Islamic (“the Bank”) would buy back the same asset from the applicant at a lower price on cash basis.
ExeCash-i for GLC
ExeCash-i for GLC is an Islamic Personal Term Financing under the Shariah principle of Bai’ ‘Inah (sale with immediate repurchase). Bai’ ‘Inah is a buy and sell contract whereby Maybank Islamic (“the Bank”) would sell its assets to the applicant on deferred payment basis. Subsequently, Maybank Islamic (“the Bank”) would buy back the same asset from the applicant at a lower price on cash basis.
The ExeCash-i for Government Linked Companies (GLC) provides financing without collateral to meet any of your personal needs.
KOWAMAS
KOWAMAS is an Islamic Personal Term Financing under the Syariah principle of Bai’ ‘Inah (sale with immediate repurchase). Bai’ ‘Inah is a buy and sell contract whereby Maybank Islamic (the Bank) would sell its assets to the applicant on deferred payment basis. Subsequently, Maybank Islamic (the Bank) would buy back the same asset from the applicant at a lower price on cash basis.The personal financing package for Koperasi Wawasan Malaysia Berhad (KOWAMAS) provides financing without collateral to meet any of your personal need.
Hire Purchase-i
Hire Purchase-i is based on the underlying Shariah principle of Al-Ijarah Thumma Al-Bai (AITAB). It means leasing and subsequent purchase. It refers to 2 contracts undertaken separately and consequentially i.e. Al-Ijarah contract (leasing) and Al-Baicontract (purchase). It is an extension of the principle of Al-Ijarah whereby both parties further agreed that at the end of the lease period, the customer will purchase from the Bank the asset concerned at an agreed price with all the lease rentals previously paid constituting part of the price.
Operations of Hire Purchase-i are based on Hire Purchase Act 1967 whereby all provisions that conform to Shariah requirement are applicable.
Maybankinvest-i
Maybankinvest-i is an alternative Share Trading / Financing package from Maybank that is based on the Shariah principle of Murabahah. Under this contract, Maybank agrees to finance your share trading activities in approved Shariah counters listed in Bursa Malaysia.
ASB Financing-i
ASB Financing-i is another form of term financing to purchase ASB unit trust based on Shariah principles of Bai’ ‘Inah (sales with immediate repurchase)
3.6 PERFORMANCE ANALYSIS OF MAYBANK ISLAMIC BERHAD
The performance of Maybank Islamic Berhad are analyzed from the information that have been obtained from overall performance data of Maybank Maybank Islamic just been setup recently , thus the performance will be measured along with the parent company, all of the performance regarding loan that had been published and other information are depend from the performance of Maybank. The only thing that is separated is total net income and operational income of a Maybank Islamic  .
The analyses that have been done by the researcher are from the analysis of a Maybank itself. It includes various information of a bank performance as a whole that gave a clearer picture about the important information regarding total asset, total liability, total loan and various more. Besides that, there is also analysis of a statement of income that includes the performance of Maybank Islamic.
3.6.1 Total Assets  
For the financial year ended 30 June 2010, outstanding assets of the Group expanded by 8.4% or RM26.0 billion resulting the total asset of group at RM 336,700 Million while at the Bank level, it increased 4.2% or RM10.1 billion to record an amount of RM 248,392 Million . For the previous year, the corresponding growth rates were 15.5% at Group level and 8.7% at Bank level. The bulk of the Group’s growth in assets was derived from the expansion of net loans and advances which grew by RM19.8 billion or 10.6% and RM7.0 billion or 4.9% for the Group and the Bank respectively.
As at end of June 2010, net loans and advances represented 61.0% of total Group assets, higher than the 59.8% as at the end of June 2009.
3.6.2 Securities purchased under resale agreements  
Securities purchased under resale agreements are securities which the Group and the Bank had purchased with a commitment to resell at future dates. The commitments to resell the securities are reflected as assets on the balance sheet. Conversely, obligations on securities sold under repurchase agreements are securities which the Group and the Bank had sold from its portfolio, with a commitment to repurchase at future dates. Such financing transactions and corresponding obligations to purchase the securities are reflected as liabilities on the balance sheet.
As at end June 2010, the Group held RM371.2 million of securities purchased under resale agreements.
3.6.3 Deposits and Placements with Financial Institutions  
The Group’s deposits and placements with financial institutions grew by RM2.6 billion to RM8.9 billion or 41.5% as Customer deposits growth outpaced the growth in loans and advances.
3.6.4 Life, General Takaful and Family Takaful Fund Assets  
After a growth of 7% or RM1.1 billion in the previous year, this balance sheet item grew by a similar 7% to RM18.0 billion as at end of June 2010
3.6.5 Securities Portfolio  
The investment securities portfolio of the Group decreased by RM3.6 billion or 6.2% mainly due to a reduction of shorter tenor Available-for-Sale holding (RM5.2 billion) as interest rates were expected to rise in the first half of 2010.
Securities Held-for-Trading increased by RM1.2 billion which was partially offset by the reduction in Available-for-Sale portfolio. Around 79% of the securities portfolio comprised of securities Available-for-Sale and further 16.5% securities Held-to-Maturity while 4.9% of the securities portfolio is Held-for-Trading.
3.6.6 Loans, Advances and Financing  
The Group’s net loans and financing for financial year of 2010 expanded by 10.6% or RM19.8 billion compared to 12.9% or RM21.2 billion the previous financial year. The Group’s gross loans grew 10.3% compared to 13.0% the previous year with domestic and overseas loans growth of 11.0% and 8.8% respectively. The domestic operations growth of 11.0% was better than the 6.5% recorded in the previous year as consumer loans expanded by 15.0% on the back of the RM3.3 billion or 28.6% growth in securities loans, mainly for the purchase of relatively low-risk Amanah Saham Bumiputera units, and the RM2.6 billion or 13.2% increase in vehicle loans. The Group’s overall domestic loans market share stood at 17.6% compared to 17.8% the previous year. Mortgage loans grew by RM3.1 billion or 9.8% compared to 3.3% in the previous year with market share at 13.4% compared to 13.9% the previous year. Credit card receivables for the financial year rose RM0.6 billion or 16.0%, outperforming the industry’s 11.3% growth leading to market share rising to 12.8% from 12.7% the previous year. Automobile financing for domestic operations recorded a growth of 12.2% compared to 11.0% in the previous financial year and outperformed the industry’s growth of 8.5%. With growth exceeding the industry, the market share for financing of motor vehicles rose to 17.4% from 16.8% in June 2009.
As at June 2010, the overseas operations loan book accounted for 32.3% of the Group’s loan base from 32.8% in the previous year. The gross loans book for Singapore recorded a growth of 3.4% or RM1.3 billion after registering a growth of 6.2% in 2009. While for Indonesia, mainly due to Bank Internasional Indonesia, gross loans grew 37.7% or RM4.7 billion to RM17.1 billion. In the other overseas locations, total gross loans declined 3.7% or RM0.4 billion mainly due to the reduction in loan exposure in the US and United Kingdom following the financial crisis. The Group’s Islamic gross financing and advances grew by 31.2% or RM8.2 billion during the year. Islamic banking constitutes a growing portion of the Group’s banking business, accounting for 16.3% of gross loans and financing from 13.7% the previous year. Islamic gross financing accounted for 24.0% of domestic gross loans, rising from 20.3% recorded in the previous year. Sustained efforts implemented to continuously improve asset quality have been effective. The Group’s gross NPL ratio declined to 2.9% from 3.5% the previous year. The Group’s net NPL ratio declined to 1.2% from 1.6% the previous year. The Group’s net NPLs declined by RM0.5 billion to RM2.3 billion as at June 2010. The Group’s NPL reserve cover (net of IIS) rose to a healthy 124.5% compared to 112.9% the previous year.
3.7 Deposits from Customers  
The Group’s customer deposits expanded by 11.4% or RM24.3 billion to RM236.9 billion while at the Bank level it grew by RM7.3% or RM11.9 billion to RM175.4 billion. The Group’s strong franchise contributed to a growth of 9.1% for demand deposits and 9.9% for savings deposits. The Bank’s domestic operations remained the leader in both demand and savings deposits with market shares of 20.7% and 27.4% compared to 21.3% and 26.6% respectively in the previous year. Fixed deposits grew by 10.0% compared to 12.3% in the previous year. The Group’s overall deposit funding mix improved slightly as the Group’s ‘higher cost’ fixed deposits declined to 55.1% of total customer deposits from 55.8% in June 2009
3.6.8 Deposits and Placements of Financial Institutions  
This item fell by 19.2% or RM5.5 billion due to increase in deposits from customers (RM24 billion) which resulted in less sourcing of funds from interbank market.
3.6.9 Shareholders Equity  
The Group’s shareholders’ equity rose by 12.0% or RM3.0 billion to RM27.9 billion. The increase was mainly due to increase in retained profits for the year.
3.6.10 Net Interest Income  
Net interest income of the Group increased by RM851.4 million or 14.4%. The average net interest margin was 2.82% from 2.72% the previous year due to lower interest expenses in the Malaysian operations, especially interest expenses from fixed deposits, and lower interest expenses in the Singapore operations as well as full year contribution from Bank Internasional Indonesia (BII) for financial year of 2010.
3.6.11 Islamic Banking  
Net income from the Group’s Islamic banking operations increased by RM210.4 million or 17.2% to RM1.4 billion. The increase was mainly due to growth of assets in Islamic business, specifically hire purchase and residential mortgages.
3.6.12 Overhead Expenses  
The Group’s overheads expenses rose by RM852.9 million or 15.3% over that of the corresponding year as a result of an increase in personnel cost, full-year contribution from BII and expansion of BII, higher establishment costs, and credit card related expenses due to higher transaction, volume. The Group’s cost to income ratio declined to 49.8% from 52.8% previously as net income growth outpaced the growth in expenses. Personnel costs increased by RM364 million or 14.3% due to an increase in salary, EPF, bonus and training. Establishment costs increased by RM66.2 million as a result of higher cost from depreciation and rental. On a comparable basis, the Group’s adjusted cost to income ratio (without insurance claims and unrealised loss) would be 47.8% against 49.1% for the previous financial year.
3.6.13 Loan and Financing Loss and Provisions  
Loan loss and provisions of the Group amounted to RM1.2 billion, which is RM510.8 million or 30.1% lower than that of the previous year. This decrease was primarily due to high general provisions made in the final quarter of financial year end of 2009 resulting from the weak global economic situation.
3.6.13 Taxation  
The effective tax rate of the Group is 26.1% which is higher than the statutory rate of 25% mainly due to non-deductible expenses.
3.7 CONCLUSION
From the analysis it clearly shows that the financial performance of Maybank Islamic experienced a strong growth. The increasing of the loan product especially individual loan and also with the stable increase of total income after tax , in addition to that the reducing of non – performing loan portrayed the growth of Maybank Islamic especially their financial performance .
According to a rough estimation from the analysis, it clearly shows that Maybank Islamic can compete with other Islamic banking institution.
Based on the total asset that is increasing yearly and non – performing loans that are reducing, it portrayed that the total net asset of Maybank Islamic are going stronger. Besides that, the increasing of individual loan shows that this institution gaining the trust of the community.
Although there is a slight fall in Islamic deposit, but it is mainly because of Islamic debt and sukuk debt that occur outside of the country resulting the cost of fund to increase, and it is not because of a belief of a people about Islamic product offered by Maybank Islamic are not interesting enough.
As a conclusion, Maybank Islamic Berhad has a strong position in their field as their finance and asset position are really good.