May­bank op­ti­mistic on loan growth, NIM

> Q2 net profit up 43%, driven by higher net in­ter­est in­come, mar­gin

The Sun (Malaysia) - - SPEAK UP - BY LEE WENG KHUEN

PETALING JAYA: Malayan Banking Bhd (May­bank), which re­ported a 43% in­crease in sec­ond-quar­ter net profit, ex­pects con­tin­ued ex­pan­sion in loans and net in­ter­est mar­gin (NIM) for FY17.

The group reg­is­tered 6.4% loan growth for the first six months, with NIM im­prov­ing to 2.41% in June 2017 from 2.28% in June 2016 and 2.27% in De­cem­ber 2016.

CFO Datuk Amirul Feisal Wan Zahir was non­com­mit­tal on whether the full-year 6%-7% loan growth tar­get is achiev­able given that sec­ond-quar­ter loan growth saw a 1.2% con­trac­tion quar­ter-on­quar­ter, say­ing only that it will be in line with in­dus­try growth. He was speak­ing at a brief­ing on the group’s first-half re­sults.

Its other head­line key per­for­mance in­di­ca­tors for FY17 in­clude 6%-7% de­posits growth and 10% to 11% re­turn on eq­uity.

None­the­less, Amirul Feisal high­lighted that loan growth for its op­er­a­tions in In­done­sia and Singapore is chal­leng­ing due to the com­pet­i­tive pric­ing in the cur­rent en­vi­ron­ment that de­mands high-qual­ity credit.

For the Malaysian op­er­a­tions, NIM is ex­pected to con­tract in the sec­ond half due to still com­pe­ti­tion for de­posits.

While the gross im­paired loans (GIL) ra­tio has been ris­ing since Septem­ber last year, Amirul Feisal said, the group is not overly con­cerned as it was due to a flat loan base. “We do hope loan growth will im­prove, there­fore it (GIL) will nor­malise.”

May­bank’s net im­paired loans ra­tio rose slightly to 1.73% as at June 2017 from 1.72% a year ear­lier, while gross im­paired ra­tio went up from 2.34% to 2.53%.

The group’s net profit jumped to RM1.66 bil­lion for the sec­ond quar­ter ended June 30, 2017 against RM1.16 bil­lion in the pre­vi­ous cor­re­spond­ing pe­riod, driven by higher net in­ter­est in­come and NIM, as well as lower net im­pair­ment losses.

Rev­enue, how­ever, was flat at RM10.92 bil­lion com­pared with RM10.94 bil­lion in the same pe­riod last year.

The group has pro­posed an in­terim div­i­dend of 23 sen a share, amount­ing to RM2.4 bil­lion for the quar­ter un­der re­view, rep­re­sent­ing a div­i­dend pay­out of 72.2%.

For the first half of the year, May­bank’s net profit ex­panded 29.9% from RM2.59 bil­lion to RM3.36 bil­lion on the back of a 0.4% rise in rev­enue from RM22.12 bil­lion to RM22.2 bil­lion.

Its net im­pair­ment losses for the first half de­clined sub­stan­tially to RM1.38 bil­lion from RM2.06 bil­lion a year ago, given the group’s proac­tive stance taken since early last year to re­struc­ture and resched­ule the credit fa­cil­i­ties, par­tic­u­larly from the mar­ket seg­ments that were af­fected by the chal­leng­ing eco­nomic en­vi­ron­ment.

The group’s loan-to-de­posit ra­tio as at June 2017 im­proved to 93.8% from 93.9% as at De­cem­ber 2016.

May­bank said it re­mains one of the strong­est cap­i­talised banks in the re­gion with a to­tal cap­i­tal ra­tio of 18.98% and com­mon eq­uity tier-1 ra­tio of 13.56%, af­ter the pro­posed div­i­dend and as­sum­ing an 85% div­i­dend rein­vest­ment rate.

On an­other note, May­bank pres­i­dent and CEO Datuk Ab­dul Farid Alias ( pix) said the group is un­de­cided on the pro­posal mooted by Per­modalan Na­sional Bhd (PNB), May­bank’s largest share­holder, to con­vert 20% of the banking group’s shares into Is­lamic shares or i-shares, em­pha­sis­ing that it is still too early to tell.

He, how­ever, did state that the pro­posal should not lead to the cre­ation of dif­fer­ent classes of shares as well as a sub­sidiary.

Farid also said there is no plan to spin off May­bank Is­lamic.

To re­cap, PNB chair­man Tan Sri Wahid Ab­dul Omar called on May­bank to con­sider cat­e­goris­ing 20% of its shares as Is­lamic shares, which could cre­ate new syariah-com­pli­ant eq­uity in­stru­ments worth RM20 bil­lion.

May­bank shares were un­changed at RM9.46 yes­ter­day on 15.38 mil­lion done, giv­ing it a mar­ket cap­i­tal­i­sa­tion of RM100.01 bil­lion.

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