Malaysian banks net earnings growth up twenty percent in third quarter
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
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