Financial Analysis: Maybank and Petronas Capital Structures

This report provides a comparative analysis of the capital structures of Maybank and Petronas, two prominent Malaysian companies. The analysis examines Maybank's capital management strategies, including its emphasis on core capital, dividend reinvestment plans, and adherence to Basel III principles. It explores how Maybank maintains its capital adequacy and supports business growth. The report also investigates Petronas' financial profile, focusing on its dividend payments, debt levels, and the impact of government policies. The comparison highlights the strengths and weaknesses of each company's approach to capital structure, considering factors such as financial leverage, shareholder returns, and external ratings. The report references key financial data, including debt-to-equity ratios, net profits, and dividend yields, to provide a comprehensive overview of their financial health and strategic decisions. The report also considers external factors affecting the companies' financial performance, such as oil prices and government regulations.

Maybank
The quality and synthesis of capital are critical factors in the Board and senior administration's
assessment of the Group's capital sufficiency position. The Group places solid accentuation on
the nature of its capital. It holds a lot of its money as the primary value, which is perpetual and
has the most noteworthy misfortune ingestion capacity on a going concern premise. \
The average value capital of the Group involves gave and paid-up offer capital, share premium,
holds, and held benefits. During the monetary year, the gave and paid-up offer capital of the
Group has expanded by another RM800,609,252 emerging, among others, from the private value
arrangement of 412,000,000 new standard portions of RM1.00 each on 11 October 2018 just as
from the culmination of the fourth and fifth Dividend Reinvestment Plan ("DRP") by means of
the issuance and distribution totaling 375,998,352 new reasonable portions of RM1.00 each on 5
June 2018 and 29 October 2018 separately. ("Capital structure", 2019)
The DRP plan was declared by the Bank on 25 March 2015 to enable shareholders of the Bank to
reinvest their dividends into a new ordinary share(s) of RM1.00 each in the Bank. The DRP is a
piece of the Group's procedure to protect standard value capital in front of the Basel III
principles. That began on 1 January 2017 just as to guarantee adequate ability to develop its
business while giving a substantial dividend salary to its shareholders.
Notwithstanding the Capital Conservation Buffer, BNM may likewise present the
Countercyclical Capital Buffer going somewhere in the range of 0% and 2.5% of complete
hazard weighted assets. Huge loss retentiveness prerequisites for foundationally significant
financial establishments. The Countercyclical Capital Buffer will be resolved as the weighted-

normal of the predominant Countercyclical Capital Buffer necessities applied in the wards, in
which the financial foundation has credit exposures and other capital cradles as considered
suitable, having respect to the particular hazard profile of the commercial establishment.
("Capital structure", 2019) The other losses receptiveness prerequisites for foundationally
significant commercial establishments will be surveyed at a later stage by BNM on the
requirement for large financial organizations to work at more significant levels of capital.
The Group will keep on being proactive in its effective use of capital administration and will
always screen on-going improvements influencing administrative capital prerequisites just as
related capital market advancements. The Group is additionally dedicated to guaranteeing
nonstop sound capital levels with an ideal capital blend to offer help to the Group's basic plan,
and all the while amplifies an incentive to our shareholders. (Booth, Aivazian, Demirguc&
Maksimovic, 2015)
Petronas
The money related profile of Petronas may fall apart if the administration keeps on requesting
that the organization keep dividend installments high, particularly should oil costs decay. "Such a
circumstance would never again bolster an appraisals level for the organization that is right now,
two indents over that of the sovereign. As reported in the Malaysian spending plan on 2
November 2018, Petronas will pay MYR30 billion as a coincidental exceptional dividend to the
Government of Malaysia in 2019, notwithstanding the average yearly bonus, which in 2019 will
add up to MYR24 billion. The organization will likewise pay MYR26 billion in profits in 2018
versus annual dividend installments of MYR16 billion of every 2016 and 2017. (Ahmad & Wan,
2018)

Even though Petronas can bolster, the dividend installments declared in the financial limit and
still keep up a net money position. Further increment in regular dividend installments can't be
precluded mainly if there is an expansion in the government's subsidizing needs. High
shareholder returns will lessen the organization's capacity to ingest the instability in raw
petroleum costs and compel its money related adaptability.
"Further, changes to the Malaysian government's strategies for the oil and gas part could
influence Petronas' position as the sole proprietor of the nation's oil assets, and increment the
eminences paid on its upstream oil and gas creation. These progressions could put weight on the
organization's evaluations, particularly if Petronas is required to keep paying high dividend
installments. (Haron, 2014)
Petronas' net money related influence — as estimated by total debt/EBITDA — improved to 0.7x
for the year ended 30 June 2018 from about 1.0x for 2016. They anticipate that the organization
should keep up its gross monetary influence underneath 0.8x-1.0x throughout the following 2-3
years.
The organization's total debt/complete capitalization stays traditionalist, at underneath 15% at 30
June 2018. The company expects that this proportion will remain at 15%-20% throughout the
following 2-3 years when contrasted with its downsize limit of above 30%-35%.
The organization's net monetary position — which expanded to MYR97 billion on 30 June 2018,
contrasted with MY42.8 billion on 31 December 2016 — will probably remain at MYR75-
MYR80 billion throughout the following 2-3 years. Petronas outside cash rating is two scores
over Malaysia's remote money security rating, in light of:
1) the organization's excellent independent credit profile; and
2) Petronas' great extent of income (over 70% in 2017) from fares and global activities.

An enormous debt-supported obtaining or further increment in shareholder installments, without
a balancing improvement in income, could likewise put weight on the evaluations.
Comparison between both the companies
Maybank places solid accentuation on the nature of its capital to keep meeting the base
administrative prerequisites and bolster business development and dangers embraced.
Accordingly, the Group holds a lot of its money as a standard value, which is lasting and has the
most elevated misfortune retention ability on a going concern premise.
Notwithstanding the regular value, the Group likewise keeps up different sorts of capital
instruments. For example, Additional Tier 1 Capital Securities and Subordinated Debts to
upgrade capital blend and decrease in general expenses of capital.
Petronas will keep on being fundamentally more grounded than the level required to keep up. If
there are no further enormous erratic dividend demands from the administration or if the
legislature will permit Petronas to lessen dividends when oil costs decay.
The accompanying variables bolster the organization:
1. enormous scale hydrocarbon saves;
2. in number budgetary measurements;
3. preservationist monetary strategies; and
4. strong liquidity profile.
Simultaneously, Petronas' BCA stays compelled by the geographic grouping of its oil and gas
hold in Malaysia. The moderately small size of its downstream activities, with the last bringing
about its raised presentation to the cyclicality in the oil and gas industry.

Expert surveys the desire for remarkable help from the Government of Malaysia and the
association between the legislature and the organization as high. Be that as it may, this
circumstance doesn't bring about any evaluations inspire, given the lower rating of the
administration comparative with Petronas. (Hossain, 2012).
References
Capital structure. (2019). Retrieved 16 October 2019, from
https://www.maybank.com/MaybankAR14/pdf/Maybank_AR2014_Capital_Management.pdf

Ahmad, N., & Wan Aris, Y. B. (2018). Does Age Of The Firm Determine Capital Structure
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Booth, L., Aivazian, V., Demirguc‐Kunt, A., & Maksimovic, V. (2015). Capital structures in
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Haron, R. (2014). Capital structure inconclusiveness: evidence from Malaysia, Thailand and
Singapore. International Journal of Managerial Finance, 10(1), 23-38.
Hossain, F., & Ali, A. (2012). Impact of firm specific factors on capital structure decision: an
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Management, 3(4), 163- 182.