Malaysian banks net earn­ings growth up twenty per­cent in third quar­ter

The Pak Banker - - Front Page -

PU­TRA JAYA: Malaysian banks have ex­tended their streak of ster­ling dou­ble-digit net earn­ings growth to a fifth straight quar­ter by post­ing a 20.1% year-on-year growth in the third quar­ter (Q3) of this year.

An an­a­lyst with CIMB Re­search said this pos­i­tive trend re­flected the favourable op­er­at­ing en­vi­ron­ment of strong loans growth of above 11%, ac­tive cap­i­tal mar­kets and sta­ble as­set qual­ity, which en­abled banks to achieve their pro­jected core net profit growth of 27.9% this year and 16.3% next year. Against this buoy­ant back­drop, we reaf­firm our over­weight stance on the sec­tor pred­i­cated on the po­ten­tial re-rat­ing cat­a­lysts of strong earn­ings growth, higher in­vest­ment bank­ing in­come, bet­ter growth prospects for over­seas op­er­a­tions, po­ten­tial gross profit write­backs, and up­side po­ten­tial to div­i­dend fore­casts, the an­a­lyst said in a re­port.

He said the ma­jor banks were all in line with the re­search house ex­pec­ta­tions. Al­though the an­nu­alised com­bined net profit for Malaysian banks in Q3 was 4.8%, short of our fore­cast, we con­sider the re­sults to be in line as it will be cov­ered by stronger earn­ings ahead. All banks met our ex­pec­ta­tions and Al­liance Bank Malaysia Bhd was the only fi­nan­cial in­sti­tu­tion to trump ex­pec­ta­tions, re­port­ing re­sults that were about 6% ahead of our fore­cast and con­sen­sus es­ti­mates, the an­a­lyst said.

The re­search house had upped its earn­ings fore­casts by only 0.1% to 0.2%, mainly be­cause of Al­liance Bank's earn­ings up­grades.

The an­a­lyst said Q3 net earn­ings were buoyed by a 9.9% yearon-year rise in net in­ter­est in­come, 11.7% year-on-year de­cline in loan loss pro­vi­sion­ing, and 8% year-onyear in­crease in non-in­ter­est in­come.

CIMB Re­search pro­jected a 27.9% core net earn­ings growth this year for Malaysian banks in its cov­er­age, un­der­pinned by a 14.7% rise in net in­ter­est in­come, 13.8% in­crease in non-in­ter­est in­come, and 8.5% slide in credit costs. These fac­tors will more than off­set a pro­jected 7% in­crease in over­heads, the an­a­lyst said.

The an­a­lyst how­ever noted that there was a slight soft­en­ing of loans growth start­ing from June. The loan mo­men­tum soft­ened from 12.5% year-on-year in June 10 to 11.9% year-on-year in Sept 10. The busi­ness loan seg­ment posted slower growth of about 10.2% year-onyear in Sept 10 com­pared with circa 12.1% year-on-year in June 10. he said.

The an­a­lyst said con­sumer loans con­tin­ued to gain trac­tion, ris­ing from 12.8% year-on-year in June 10 to 13.3% year-on-year in Sept 10. How­ever in Q3 the in­dus­try's gross im­paired loans slid 3.2% quar­ter-on-quar­ter to RM29­bil as at Sept 10, while to­tal pro­vi­sions inched down by 0.5% quar­ter-on­quar­ter. -PB News

IS­LAM­ABAD: Am­bas­sador of Swe­den Ul­rika Sund­berg called on Fed­eral Min­is­ter for In­te­rior Sen­a­tor A Rehman Ma­lik at Min­istry of In­te­rior. -On­line

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