‘Top three lenders’ dividend payout may be affected by Bank Negara designation’

The three biggest banks in Malaysia could see their dividend payout affected by Bank Negara Malaysia’s designation of the banks as domestic systemically important banks (D-SIBs).

Affin Hwang Capital said this meant Malayan Banking Bhd (Maybank), CIMB Group Holdings Bhd and Public Bank Bhd would need the central bank’s approval before paying out dividends to shareholders.

D-SIBs refer to banks whose distress could potentially cause considerable disruption to the domestic financial system and the wider economy.

As a result, Bank Negara said the D-SIBs would need to maintain higher capital buffers (at the consolidated level) to meet the higher loss absorbency (HLA) requirement.

The HLA requirement for Maybank and CIMB is one per cent of risk-weighted assets at consolidated level while for Public Bank, it is 0.5 per cent.

“In our view, these banks already have sufficient common equity Tier-1 (CET-1) capital level that are ahead of the Basel 3 requirements and, as such, do not need to raise additional equity capital unless their capital ratios dipped below the requirements set by Bank Negara,” said Affin Hwang yesterday.

It said as at Sept 30 last year, the CET-1 ratio of Maybank stood at 14.4 per cent, CIMB Group at 13.1 per cent and Public Bank at 13.1 per cent.

“We believe the sector implication is minimal and these DSIBs do not have to raise additional equity capital.

“Nonetheless, the ability of these D-SIBs to pay higher dividends could potentially be constrained by this requirement,” it said.

Affin Hwang has maintained its “neutral” call on the banking sector, noting that earnings catalysts were lacking while loan growth might moderate further to three per cent this year.

“At this juncture, we foresee a contraction in sector core earnings per share of 1.8 per cent yearon-year this year and flat growth next year.”