Maybank optimistic on continued expansion in loans, net interest margin

KUALA LUMPUR: 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 non-committal on whether the full-year 6%-7% loan growth target is achievable given that second-quarter loan growth saw a 1.2% contraction quarter-on-quarter, 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 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 today on 15.38 million done, giving it a market capitalisation of RM100.01 billion.