Maybank remains cautious amid challenging environment
CEO says there’s still uncertainty despite significant rise in profits
KUALA LUMPUR: Malayan Banking Bhd (Maybank), backed by a 43% rise in net profit for its fourth quarter ended Dec 31, 2016, remains cautious on the outlook of the sector amid the challenging environment.
The 43% year-on-year gain to RM2.36bil was helped by a one-off gain from the sale of securities. However, even after stripping out the extraordinary gain, the country’s biggest banking group registered a net profit growth of 15.9%.
Group president and chief executive officer Datuk Abdul Farid Alias described the pick-up in the fourth quarter as “modest” and is maintaining a conservative stance “in respect of continuing to reschedule and restructure accounts which could experience stress over the medium term”.
“We are not soothsayers and cannot predict how long the cycle (of uncertainty) will last, we are still in the cycle ...,” Abdul Farid said after announcing the lender’s full-year financial results here yesterday.
While it remains “watchful” over the bank’s asset quality in view of the challenging environment, the economic environment is generally improving, Abdul Farid added.
“For instance, there are signs of stability in commodity prices but it will take some time before these are translated into cashflow,” he said, referring to the businesses of the bank’s clients.
Maybank’s pre-tax profit for financial year 2016 (FY16) came in marginally lower at RM8.84bil compared with RM9.15bil for FY15, given additional provisions following the lender’s stance to reschedule and restructure credit facilities of customers thought to be potentially vulnerable to the weaker global economic conditions.
Provisions are part of the business, Abdul Farid said, declining to comment on whether more or less would be made, moving forward.
Maybank’s net profit for the fourth quarter stood at RM2.36bil, 43% higher than the net profit of RM1.65bil for the same period a year earlier, helped by a pick-up in loans, fee income, a smaller rise in overhead expenses and a one-off gain from the sale of securities.
Maybank’s revenue for the fourth quarter stood marginally higher at RM11.2bil compared with RM11.1bil earlier.
For the full year, net profit was at RM6.74bil, while revenue was at RM44.66bil.
A final single-tier dividend of 32 sen per share has been proposed and together with the earlier interim dividend of 20 sen per share, this translates into a dividend payout ratio of 78.1% of FY16 net profit or a dividend yield of 6.3%.
For the year under review, Maybank’s gross loans rose 5.7%, helped by a 8.7% rise at its Indonesian operations, a 6.3% rise in Malaysia and 4.5% in Singapore.
Amid the challenging environment, net interest margin for FY16 dipped four basis points to 2.27% from 2.31% earlier while cost-to-income ratio stood at 47.3%, in line with its target of maintaining a ratio of below 50%.
In terms of its capital position, the total capital ratio and common equity tier-1 ratio stood at 18.9% and 13.6% compared with 17.5% and 12.5% a year earlier. Return on equity, a measure of a bank’s profitability levels, stood at 10.6%.
For FY17, Abdul Farid said income growth would be driven by expansion in the bank’s fee income stream and wide-cross selling initiatives.
Among its targets for this financial year is a return on equity of 10% to 11% and a group loans and deposits growth of 6% to 7%.
At yesterday’s close, shares in Maybank finished at RM8.40, down two sen.