The country's largest bank Malayan Banking (Maybank) today said it aims to expand its business in Southeast Asia ahead of financial sector liberalisation, focusing on the more developed countries in the region.

Maybank now operates in seven countries of the 10-member Association of Southeast Asian Nations (Asean) and ranks among the top five banks in the region, said president and chief executive Amirsham Aziz.

"In Asean, we are probably number three or number four," he told reporters at a meeting of the Asian Pacific Bankers Club grouping 46 banks from 13 countries.

"We are in almost every location in Asean and we will continue to focus our attention and business in the region.

"At the moment, we're not in Thailand, Laos and Burma. We always look at opportunities but we are more interested in looking at the more highly developed Asean countries."

Small player

Analysts said Maybank's presence in the region is still small and it must seek mergers or alliances to stay competitive when the Malaysian financial market liberalises fully in 2007.

"Despite being among the top few in the region, it is still far behind in terms of size and asset base compared to US banks for instance," said Andrew Chuah, analyst with Mercury Securities.

After a sweeping consolidation program two years ago to create 10 major bank groups, the central bank now envisages a second wave of mergers to leave between six and eight banks but it insists this process will be market-driven.

Prime Minister Dr Mahathir Mohamad has said local banks will learn that mergers are crucial for survival because foreign banks in Malaysia are already doing more business despite operational limitations.

US-based banking giant Citibank for example, is much bigger than Maybank even though it operates only from Kuala Lumpur and is barred from opening branches in villages, he said.

Internal governance

In a speech earlier, Amirsham said foreign banks had an advantage over local institutions because they could quickly introduce products and services that promise huge profits.

However, he warned that local and regional banks, while seeking expansion, must not "rush headlong into taking excessive risks" because it could lead to financial instability.

"Mergers and acquisitions have always been a favourite engine for growth but more often than not, when not handled carefully, it has been a destroyer rather than a creator of value," he said.

Regional banks must first strengthen internal governance and adopt proper controls for risk awareness and management, he added. - AFP