May­bank, CIMB, Pub­lic Bank and RHB saw pos­i­tive sur­prises in Q4, says an­a­lyst

New Straits Times - - Business - LIDIANA ROSLI KUALA LUMPUR lidiana@me­di­aprima.com.my

THE bank­ing sec­tor’s “Big 4” have per­formed as ex­pected although shrink­ing Sin­ga­pore­based as­sets clouded their re­sults last year, said an­a­lysts.

They are cau­tious about the out­look for Malayan Bank­ing Bhd (May­bank), CIMB Group Hold­ings Bhd, Pub­lic Bank Bhd and RHB Bank Bhd this year.

Ex­pect­ing sub­dued loan growth, an­a­lysts said there would be pres­sure on net in­ter­est mar­gin (NIM).

“Re­sults were mixed but in gen­eral, the Malaysian bank­ing sec­tor came in within our ex­pec­ta­tions this year,” said an MIDF Re­search an­a­lyst who did not want to be named.

“There were some sur­prises, such as the Overnight Pol­icy Rate cut and higher-than-ex­pected pro­vi­sions and im­pair­ment, es­pe­cially on some ac­counts in the oil and gas (O&G) sec­tor.

“These have im­pacted banks with NIM com­pres­sion and lower earnings. How­ever, we be­lieve that these im­pacts have since nor­malised.”

The an­a­lyst added that the pick-up in loan growth mo­men­tum as well as ex­pan­sion in some cur­rent ac­count sav­ings ac­count fran­chise and im­proved mar­gins in the fourth quar­ter of last year were pos­i­tive sur­prises.

Ke­nanga In­vest­ment Bank Bhd eq­uity re­search vice-pres­i­dent Ah­mad Ramzani Ramli said the worst could be over for the in­dus­try.

“The only sur­prise was the higher im­pair­ments from RHB and May­bank due to their ex­po­sure in Sin­ga­pore and the pru­den­tial mea­sures taken by both banks.

“The im­pair­ments, how­ever, were only a short-term im­pact as these loans were clas­si­fied resched­ule and re­struc­ture but de­clared per­form­ing later once the O&G sec­tor sta­bilised. With oil prices look­ing sta­ble, we be­lieve this will not be a con­cern,” Ramzani told NST Busi­ness.

AmBank Re­search do­mes­tic eq­uity se­nior vice-pres­i­dent Kelvin Ong said de­spite con­cerns of weaker con­sumer con­fi­dence and lower con­sumer spend­ing amid higher in­fla­tion, the in­dus­try loan growth con­tin­ued to ex­pand by 5.3 per cent last year.

This was driven by an ex­pan­sion in re­tail loans, al­beit at a slower rate, as well as re­cov­ery in busi­ness loan growth in the fourth quar­ter of last year.

“This was ev­i­denced by a slower do­mes­tic re­tail loan growth for Pub­lic Bank while the larger cap­i­talised banks, CIMB and May­bank, reg­is­tered higher loan growths in the fi­nal quar­ter of last year, un­der­pinned by a stronger mo­men­tum in cor­po­rate loans.

“In con­trast, RHB Bank re­ported a con­trac­tion in cor­po­rate loans, im­pacted by re­pay­ments, while re­tail loans grew at a slower pace last year than in 2015.”

He said NIMs were still ex­pected to con­tract this year, contributed by pres­sure on fund­ing cost from keen de­posit com­pe­ti­tion. This is de­spite of the NIM im­prove­ment seen in the fourth quar­ter for all banks.

Ong ex­pects im­proved core earnings on a cal­en­darised ba­sis by 6.4 per cent, from a 0.3 per cent con­trac­tion last year. This will be contributed by lower pro­vi­sions and sav­ings in op­er­at­ing ex­penses from cost ini­tia­tives.

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