YSX debates bank disclosure ahead of MCB listing

As Myanmar Citizens Bank prepares to become the first lender listed on Yangon’s stock exchange, bourse officials are still debating just what level of financial disclosure listing banks should have to provide.

Any company intending to launch shares on the YSX has to meet disclosure requirements more onerous than any others demanded under domestic Myanmar regulation.

In addition to providing an initial explanation of its business, its main sources of profit and the risks it faces, a listing company has to make financial reports public. These reports must contain, at a minimum, details such as current assets and liabilities, long-term borrowings and net profit, according to the YSX.

But this leaves unclear the extent to which banks will have to provide a breakdown of their assets and liabilities, rather than simply the total value, and whether the YSX will ask for data on a bank’s loans or sources of borrowing.

Kensuke Yazu, an adviser at the YSX, said bourse officials are still considering exactly what type of documentation and information listing banks should make available to investors, a process that required convening with the Central Bank.

An official in the YSX listing department, however, said that the initial disclosure document provided by a listing bank would include a named list of major depositors, deposit amounts, detailed information on the bank’s investments, and the ratio and value of non-performing loans.

Daw Tin May Oo, a commissioner at the Securities and Exchange Commission of Myanmar (SECM), which is involved in setting disclosure requirements for listing firms, said that when banks list “everything will become transparent”.

The degree of financial detail provided by most Myanmar firms is murky at best, and banks are no exception. Privately owned companies have no obligation to provide any financial results to the public. Most private banks, including the country’s largest lender KBZ, opt not to, while a few, like rival AYA Bank, still do.

The SECM in February started requiring public firms whose shares are traded over-the-counter – in addition to those listed on the YSX – to provide a prospectus, yearly financial reports, and an investment plan for the share capital, which the SECM will check they adhere to, said Daw Tin May Oo.

But the commission is only beginning its efforts to better monitor public companies, and is concentrating on firms planning to issue shares, rather than tackling companies that already have shares trading over the counter, she added. Public firms have no official “disclosure obligation” to either the public or shareholders under the Companies Act, said Mr Yazu.

Meanwhile, the debate over the exact disclosure details for banks on the YSX is likely to be resolved before MCB is ready to launch its shares and will not delay the listing, Mr Yazu said. The bank’s general manager U Myint Win told The Myanmar Times MCB would likely start trading on the YSX in the last week of August.

MCB had hoped to list much earlier. But the bank appointed new committee members and a new director at its general meeting in late July. The appointees had to be in place to complete the listing paperwork, and will meet with bourse officials as part of the listing process, U Myint Win said.

The bank has already published basic financial results for the last three financial years, which show net profit after tax has more than doubled over that period. Profits for 2015-16 were K5.3 billion, up from K3.77 billion the previous year and K2.51 billion in 2013-14.

Data from rival banks are hard to come by, but AYA Bank – a far larger institution – posted net profits of K7.84 billion in 2014-5, down from K9.7 billion in 2013-14. AYA Bank results for the most recent financial year were not available.

U Phyo Aung, a managing director at AYA Bank, said the firm chooses to publish results in the interests of transparency.

MCB has not published data on the breakdown of its loans for the previous financial year. Its annual report for the 2014-15 financial year showed the three largest sectors for lending were the “trading sector”, which accounted for 37pc of MCB loans, the industrial sector with 23pc and the services sector with 21pc.

The bank’s annual report for 2014-15 lists its non-performing loan ratio – the volume of loans on which the borrower has stopped making interest payments as a percentage of total loans – at 2.21pc, while AYA Bank’s report for that same period showed a 1.07pc ratio.

Myanmar regulation allows banks to extend loans rather than recognise them as non-performing.

MCB also posted a 40pc jump in assets, which rose from K164.2 billion as of March 31 last year to K229.812 billion as of the same date this year. The bulk of this – K115.27 billion – is loans and overdrafts.

Investments accounted for another K50 billion of the bank’s assets as of March 31 – the bank spent K19.2 billion across 2015-16 on treasury bonds and other investments. MCB also spent K3 billion on property, plants and equipment. The lender received K218,000 in dividends from its investments in 2015-16.

Customer deposits rose from K26.2 billion in March 31, 2015, to K41.1 billion at the same point this year – a 56pc increase. The sharp rise is not particular to MCB, however. AYA Bank – although starting from a far higher base, enjoyed an even larger jump over financial year 2014-15, seeing customer deposits grow from K874.7 billion to K1.58 trillion.

 

Source: The Myanmar Times

 

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