Maybank: Too early to say if extra loan provisions needed

KUALA LUMPUR: Malayan Banking Bhd (Maybank), which saw its FY16 (financial year ended Dec 31, 2016) net profit fall slightly year-on-year due to additional loan provisions, said it is too early to tell if there will be further provisions for loans, citing the continuation of a challenging economic cycle.
Group president and CEO Datuk Abdul Farid Alias said it provided about RM3 billion last year and RM2 billion the year before.
“Whenever we lend, we have to provide (provisions). That (provisioning) is a practice. We had a heightened provisioning in the first half of last year because we restructured and rescheduled (R&R) a lot of our facilities with our customers to prepare them to be in a position where they can withstand the volatility in the marketplace,” he told a press conference after announcing the bank’s fourth quarter and full-year FY16 financial results here yesterday.
“Once we do an R&R, we have to make provisions. We have to bear, make impairment on the asset quality side and make provisions on the profit and loss side. There’s no bank that can guarantee that there will be no provision going forward because that is part of running business,” said Farid.
Stressing that it “cannot foresee the future”, Farid said Maybank wants to better manage its asset quality, building on its capital and liquidity positions, provide additional buffers in case of a severe downturn, coupled with controlled drive to increase revenue and discipline in managing costs.
It continues to maintain a cautious approach in respect of continuing to R&R accounts, a strategy that has been adopted since the beginning of 2016 to make the group more efficient.
Meanwhile, Maybank has provided a loan growth guidance of 6%-7% for FY17, from 5.7% achieved in FY16. The slight improvement in its loan growth target is a reflection of the better economic growth expected this year.
It is also targeting an return on equity of 10%-11%, from 10.6% in FY16, as well as a deposit growth target of 6%-7%, from 5.2% last year.
Farid also expects net interest margin to compress by 5-10bps in FY17 depending on competitive behaviour in the market place. It intends to tap into growth opportunities, particularly in the infrastructure segment, which is expected to be a key drive of regional economies.
Maybank’s Q4 net profit was up 43% to RM2.36 billion from RM1.65 billion a year ago, buoyed by improved revenue arising from a pick-up in loans as well as robust fee income, underscored by disciplined cost management that resulted in a smaller rise in overhead expenses.
In addition, earnings were lifted by a one-off sale of securities undertaken during the period.
Revenue rose 1.7% to RM11.25 billion compared with RM11.02 billion in the previous corresponding quarter.
Maybank’s net profit for the whole of FY16 fell 1.4% to RM6.74 billion from RM6.84 billion a year ago, given additional loan provisions made throughout the year following the group’s proactive stance to R&R credit facilities of customers assessed to be potentially vulnerable to the weaker global econmic conditions.
The bank’s revenue jumped 10% to RM44.66 billion from RM40.56 billion in the previous year.