Axiata, YTL unlikely to see material contributions from digital banks in near term: Maybank

MALAYSIA telco Axiata Group and utilities provider YTL Power are unlikely to see material contributions from their digital banking units in the initial years, although their new digital bank licences should offer them another value creation avenue, Maybank said on Thursday (Apr 5).

Axiata’s e-wallet, Boost, and its consortium partner RHB won 1 of 5 digital banking licences issued by Malaysia in April. YTL Power, together with its partner Sea Limited, won another of the licences.

A consortium comprising Grab, Singtel and Kuok brothers was also awarded a licence.

Maybank analyst Tan Chi Wei expects Boost to drive business for Axiata in the digital bank, given that Boost is among the top 3 e-wallets in Malaysia and it already has a credit business, as well as the associated digital processes and infrastructure in place.

Tan expects the digital bank can help lower the overall cost of funding for Boost. It also noted that RHB can offer the regulatory and back-end expertise pertaining to banking in their collaboration.

Meanwhile, YTL Power will likely play a support role in the digital bank operations given the digital expertise of its partner Sea, which includes digital banking in Singapore.

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Tan, however, noted that the shareholding split of the Sea-YTL consortium remains unknown, and there were reports alluding to YTL Power having majority control.

Tan has a “buy” call and target price of RM4.50 on Axiata, and a “buy” call and target price of 90 sen on YTL Power.