Malayan Banking Berhad ( MBB ) is presently the largest commercial bank in Malaysia with 40, 000 employees working in its 1, 750 subdivisions in Malaysia. MBB is besides a taking banking group in South East Asia. It has the differentiation of keeping the largest plus base that is more than USD 100 billion every bit good as market capitalisation of USD 18.6 billion with the entire equity and entire net net income of USD 9.1 billion and USD 1.2 billion severally ( Malayan Banking Berhad 2011 ) . Maybank has subdivisions in many states overseas including in Brunei, Bahrain, China, Cambodia, Hong Kong, Indonesia, Pakistan, Papua New Guinea, Philippines, Singapore, USA, United Kingdom and Vietnam. On 17 February 1962, Maybank was listed on the Kuala Lumpur Stock Exchange, which is now Bursa Malaysia ( Malayan Banking Berhad 2011 ) .
Malayan banking systems besides play an of import function towards the economic system because it is a major institutional beginning of recognition to the economic sector. Their entire plus is besides a chief factor used to estimate their profitableness public presentation. Said and Tumin ( 2011 ) stated, as shown in the underdeveloped economic systems of states like China and others, the banking system in this state besides plays an of import function in the development of the economic system of Malaysia. It is the major constituent of the fiscal system, accounting for about 70 per centum of the entire assets of the fiscal system. Soon, the Malaysian banking system that comprises of commercial Bankss, investing Bankss ( antecedently known as the merchandiser Bankss ) , Islamic Bankss, and foreign Bankss, are the major institutional beginning of recognition to the Malayan economic sector.
1.1 BACKGROUND OF STUDY
1.1.1 MBB profitableness public presentation between 1989 and 2010
MBB is chosen as the sample for this research paper because it is the largest commercial bank in Malaysia that has earned a higher net income in the banking industry in comparing to other commercial Bankss. MBB is the largest commercial bank, be it in footings of plus, net net income, stockholder equity or book value and figure of employees ( Goh, 2005 ) . In order to find MBB ‘s profitableness, we will utilize return on plus ( ROA ) as a placeholder to mensurate MBB ‘s profitableness. The ROA is a valuable step when comparing the profitableness of one bank with another or with the commercial banking system as a whole ( Rasiah, 2010 ) .
1.1.2 Economic status between 1989 and 2010
Macroeconomic factors such as rising prices, market involvement and money supply have led to economic growing. However, these factors besides have an impact on the economic status such as the national income, end product, ingestion, unemployment, inflationary stableness, nest eggs, investing, international trade and international finance, and so on. These macroeconomic factors have been used by authoritiess and many big corporations to help them in the development and rating of economic policy to foretell the economic growing of a state and concern schemes. In the center of 1997, a few Asiatic states were gripped by the Asiatic fiscal crisis ( Pempel, 1999 ) . The crisis started with the fiscal prostration of the Thai Baht in Thailand which so had an impact on Thailand ‘s adjacent states peculiarly Malaysia, Indonesia, Singapore, South Korea and the Philippines ( Pempel, 1999 ) . Pine, Chan, and Leun ( 1998 ) found that the Asiatic economic downswing started off in the summer of 1997 in Thailand, when the Thai Baht fell by more than 20 per centum in a month. Pine et Al. ( 1998 ) discovered that by the terminal of the twelvemonth, the currencies of Indonesia, Thailand and South Korea had already dropped by more than half against the US dollar. With the effusion of the recent fiscal crisis in Asia get downing in July 1997, the involvement rates, fuel monetary values and monetary values of goods and have increased ( Cheng and Tan, 2002 ) . This state of affairs had led which caused banking crises, jobs with short term debt refund, recessions, and surging economic growing rates during that twelvemonth, therefore taking to 150 Asiatic fiscal establishments being shut down, nationalized, suspended or placed under the attention of the several authoritiess ‘ restructuring bureau ( Pempel, 1999 ) .
Keeping a low and stable rising prices rate has become one of the challenges in the macroeconomic direction of most states ( Cheng et al. , 2002 ) . After sing an economic business district for about two old ages since mid-1997 due to fiscal dazes, Malaysia ‘s economic system has begun to pick up once more from the 3rd one-fourth of 1999 and the force per unit area on consumer monetary values has hence subdued to a significant extent ( Cheng et al. , 2002 ) . The rising prices rate in 2000 was less than 3 per centum. Malaysia ‘s rising prices rate was 0.6 per centum in 2010 compared to 2009, of which the rising prices rate was 5.4 per centum. However, the rising prices rate in November 2010 was at 2 per centum.
When rising prices additions, this will take to an addition in the Base Lending Rate ( BLR ) . In order to diminish consumer disbursement, the authorities will implement a higher involvement rate. This will promote the consumer to salvage more, therefore cut downing their disbursement. From the positive point of position, when the BLR additions, it is a mark that our economic system is retrieving. The latest BLR was 6.3 per centum for MBB in 2011 ( Malaysia BLR 2011, 2011 ) . Malaysia ‘s BLR in 1998 had shown a high BLR, which was 12.27 per centum, while the lowest BLR was in 2009, which was 5.55 per centum ( Edelmen, and Whittingham, 2010 ) .
However, the consumers will profit from the lowering of the involvement rate as they will use for loans in order to spread out their concerns. When the involvement rate is low, it means that the money supply in the market is increasing. This state of affairs is called the expansionary policy which is implemented in pecuniary economic sciences.
1.2 PROBLEM STATEMENT
Net incomes play an of import function in carrying depositors to provide their financess in footings of bank sedimentations on advantageous footings. Hence, the basic purpose of a bank ‘s direction is to accomplish net income which is the indispensable demand for carry oning any concern. The importance of bank profitableness as the determiner of the macroeconomic factors has made research workers, faculty members, bank directions and bank regulative governments develop considerable involvement on the factors that determine bank profitableness.
However, macroeconomic factors like rising prices, involvement rate and money supply have been impacting the profitableness of Bankss over clip. Identifying the cardinal success factors of commercial Bankss allows planing of policies that may better the profitableness of the banking industry. Therefore, the determiner of bank profitableness has attracted the involvement of academic research every bit good as of bank direction, fiscal markets and bank supervisors. Additionally, the survey of bank public presentation has become even more of import in position of the on-going fiscal and economic crises, which will hold a cardinal impact on the banking industry in many states around the Earth. The consequence of this research survey will indicate out that macroeconomic indexs all significantly influence the commercial bank profitableness public presentation. In order to bespeak the relationship between macroeconomic factors and profitableness public presentation, we have chosen Malayan Banking Berhad as our sample in this survey. Maybank has chosen to be a benchmark for the commercial bank in Malaysia. Therefore, this research survey aims to analyze the practically and map of macroeconomic factors which is related with commercial bank profitableness since 1989 to 2010. Here, research workers will look into if important relationship exists between macroeconomic factors such as rising prices, market involvement and money supply and commercial bank profitableness public presentation.
1.3 RESEARCH OBJECTIVES
This survey has a few aims to be achieved, and they are listed as below:
To find whether macroeconomic factors has a relationship with the profitableness of MBB between the old ages 1989 to 2010.
To find whether rising prices has a relationship with the profitableness of MBB between the old ages 1989 to 2010.
To find whether market involvement has a relationship with the profitableness of MBB between the old ages 1989 to 2010.
To find whether money supply has a relationship with the profitableness of MBB between the old ages 1989 to 2010.
1.4 RESEARCH QUESTIONS
There are a few research inquiries aimed to be answered at the terminal of this research. The research inquiries can steer the way of this survey and reply our inquiries about the profitableness public presentation of MBB due to the macroeconomic indexs, which are rising prices, market involvement and market growing. The research workers have designed three research inquiries for this survey which are listed below:
Is there any relationship between macroeconomic factors and the profitableness of MBB between the old ages 1989 to 2010?
Is there any relationship between rising prices and the profitableness of MBB between the old ages 1989 to 2010?
Is there any relationship between market involvement and the profitableness of MBB between the old ages 1989 to 2010?
Is there any relationship between money supply and the profitableness of MBB between the old ages 1989 to 2010?
1.5 SIGNIFICANCE OF THE STUDY
This survey has important impact for investors of MBB, every bit good as the populace and the commercial bank as it could help them in doing good determination sing forecast the profitableness public presentation.
The first group that would derive benefit from the survey is the investors of MBB. From the findings and the information collected, investors could do good, enlightening determination sing the commercial bank ‘s profitableness public presentation for their investing portfolio. With this counsel, they will be more prepared to confront any hazard when there is an rising prices crisis. Other than that, they could foretell the economic status through the rising prices rate, mean one-year base-lending rate ( BLR ) and market growing in the hereafter and addition more net income.
Apart from the investors, the populace could besides profit from this survey. Through this informations, they could utilize it as a mention to measure the profitableness public presentation of the commercial bank due to the external factors. With this research, the populace would hold an option to take the best commercial bank to do an investing or loan. This is of import to the populace every bit good as the commercial bank since both would derive benefit.
Additionally, the findings would besides profit the commercial bank itself. From this research paper, they could do a better prognosis on the profitableness in the hereafter based on the old twelvemonth ; therefore they could besides better their net income. The commercial bank could utilize the informations collected and besides the findings of this survey to do better, enlightening determination in their fiscal direction on how to better their ain bank in regard to the external factors.
1.6 SCOPE OF THE STUDY
The range of this survey covers the profitableness public presentation of MBB in the twelvemonth 1989 to 2010 for quarterly footing. The information on MBB profitableness public presentation are based on the ROA. In order to find the economic status, this research will be utilizing the external factors which are the consumer monetary value index ( CPI ) , mean one-year base-lending rate ( BLR ) and growing in the M3 constituent of money supply informations between 1989 and 2010 for quarterly footing. All the informations are gathered on a quarterly footing. The methodological analysis of this survey utilizes the multiple and simple additive arrested development theoretical accounts to analyse the profitableness of the commercial bank.
1.7 LIMITATION OF THE STUDY
This research study does non cover all commercial Bankss in Malaysia. In add-on, future research study could include other fiscal public presentation in footings of liquidness public presentation, purchase public presentation and others. Future study could besides include the internal and external factors such as plus composing, capital, sedimentation composing, disbursals direction and liquidness for internal factors, while house size, market portion and ordinances could be included as the external factors. Therefore, in drumhead, future survey should farther better on the facet of coverage.
1.8 DEFINITION OF TERMS
Tax return on plus ( ROA )
A step of company ‘s profitableness, equal to a financial twelvemonth ‘s net incomes divided by its entire assets, expressed as a per centum.
A positive alteration in the degree of production of goods and services by a state over a certain period of clip. Nominal growing is defined as economic growing including rising prices, while existent growing rate is nominal growing minus rising prices. Economic growing is normally brought about by technological invention and positive external forces.
Average Annual Base-
Lending Rate ( BLR )
Base Lending Rate ( BLR ) is a basal involvement rate calculated by fiscal establishments based on a expression which takes into history the establishments ‘ cost of financess and other administrative costs. The BLR would use on Mortgage loan and Overdraft installation.
Consumer Price Index ( CPI )
An inflationary index that measures the alteration in the cost of a fixed basket of merchandises and services, including lodging, electricity, nutrient, and transit. The CPI is published monthly. It is besides called the cost-of-living index.
Growth Rate of Money Supply ( M3 )
There are several steps for the money supply, such as M1, M2, and M3. The money supply is considered an of import instrument for commanding rising prices by those economic experts who say that growing in money supply will merely take to rising prices if money demand is stable.