|
At the end of 1996, there were 12
merchant banks operating "wholesale" banking in
Malaysia. They function as intermediaries in the short-term
money market and the capital market. They provide a wide
range of specialized services relating to all aspects of
corporate financing, financial investments and management
advice, and investment portfolio management, including
restructuring of ownership and modernizing financial
management in the corporate sector. Total assets of merchant
banks at the end of 1996 amounted to RM34 billion.
During the first seven months of 1998,
the financial intermediation activities of merchant banks
slowed down significantly. Total resources mobilised by
merchant banks from fund-based activities declined by RM6,
343.9 million to RM37, 953.2 million at end July 1998,
compared with an increase of RM9, 531.9 million during he
corresponding period of 1997 due primarily to a decline in
interbank borrowing and deposits. The new resources
generated were from placements by corporations and NIDs
issued by the merchant banks. New deposits placed by
financial institutions had declined significantly by 46.5%
or RM2, 623 million to RM3, 015.1 million as at end of July
1998, compared with an increase of 11.6% or RM522.7 million
in the same period of 1997. The bulk of the total deposits
continued to be concentrated in short-term fixed deposits of
maturity period of up to six months. Total deposits
(including repos) mobilised by the merchant banks declined
by 5.3% or RM1, 399.7 million at the end of 1997 to
Rm24,990.0 million as at the end of July 1998. The share of
deposits mobilised by merchant banks to the total
outstanding deposits of the banking system also decreased
marginally from 6.09% at the end of 1997 to 5.92% at end of
July 1998.
In terms of the lending operations,
total loans extended by merchant banks declined 2.2% or
RM516.8 million during the first seven months of 1998,
compared with an increase of 11.5% during the corresponding
period of 1997. This was mainly due to decreased lending to
the private sector, that is by RM484.5 million and a decline
in lending to the public sector was due to lower lending for
the purchase of securities, real estate and construction
compared with the corresponding period of 1997. This was
however, balanced with increased lending for the property
sector, other than residential, agriculture and the
financial services, insurance and business sectors in the
same period. Loans to the private sector accounted for 98.0%
of total loans extended by the merchant banks as at end-July
1998 while loans to the public sector accounted for 0.5%
with the remaining 1.5% being loans to foreign customers. As
at end-July 1998, the bulk of the loans was in the form of
term loans amounting to RM10,765 million or 47.8 of total
outstanding loans of the merchant banks.
In view of the larger decline in
deposits (-5.3%) as compared with the decline in loans
(-2.2%), the merchant banks recorded a resource gap of
RM2,454.8 million in the first seven months of 1998 (1997:
RM3,339 million). Consequently, the loan-deposit ratio of
the merchant banks increased to 90.2% at end-July 1998 as
compared with the end-1997 position of 87.3%. With the
increase in fixed deposits rates, the average cost of
deposits of merchant banks increased from 9.35% at the end
of 1997 to 10.97% at the end of July 1998, while the average
lending rate fell from 16.34% at the end of 1997 to 15.23%
at the end of July 1998. Thus, the gross interest margin
narrowed by 273 basis point to 4.26% at the end of July 1998
from 6.99% at the end of 1997.
Due to the abolition of the minimum fee income
requirement effective December 1996 for Tier-1 merchant banks, the
fee income of merchant banks declined as the fee-based activities
of merchant banks contracted during the first seven months of 1998.
Total income from fee-based activities declined by 53.8 to RM113.6
million, compared with a decline of 61.6% during the corresponding
period of 1997. Total fees derived from portfolio management
activities undertaken by the merchant banks fell to RM3.6 million
during the first seven months of 1998, compared with RM20.7 million
earned during the same period of 2997. The bulk of the fee-based
income was generated mainly from their activities in corporate
advisory services (RM28.8 million or 25.4%), underwriting (RM28
million or 24.6%) and the syndication of consortium loans (RM25.3
million or 22.3%).
The number of merchant banks operating
throughout the country remained at 12 with 24 branch offices as at
end-July 1998. Six merchant banks have been accorded Tier-1 status.
Total assets of the merchant bank declined by 14.4% from the end of
1997 to Rm37,953.2 million at end-July 1998, compared with an
increase of 30.0% during the same period of 1997.
|
General Section
