Maybank net profit up 13.3% in Q1

PETALING JAYA: Malayan Banking Bhd’s (Maybank) net profit for the first quarter ended March 31, 2020 rose 13.3% to RM2.05 billion compared with RM1.81 billion last year, on the back of a 14.7% rise in net operating income at RM6.72 billion supported by growth from community financial services and global banking.

Its revenue grew 1.9% to RM13.22 billion from RM12.98 billion in the corresponding quarter last year.

The results translate into a return on equity of 10.6% and earnings per share of 18.2 sen, up 11.4% from 16.4 sen per share in the same period last year.

Net fee-based income rose 53.2% year-on-year (y-o-y) as the group leveraged opportunities to realise gains from investment and trading, as well as benefitted from higher revaluation of derivatives and financial liabilities. Net fund-based income, however, rose a marginal 0.9% given the slower pace of loan expansion and the impact of two cuts in the overnight policy rate (OPR) during the quarter.

Its net interest margin (NIM) as at March 2020 only narrowed by 7 basis points (bps) to 2.23% from 2.30% a year earlier.

The group’s CET1 ratio strengthened to 14.79% while total capital ratio stood at a comfortable 18.50% (after the second interim dividend for FY2019), maintaining its position as one of the best capitalised banks in the region. Maybank’s liquidity coverage ratio, meanwhile, was at a healthy 138.2% - way above the regulatory requirement of 100%.

Overall group loans came in marginally higher by 0.3% y-o-y. Maybank’s gross impaired loan ratio moved up to 2.71% as at March 2020 from 2.48% last year.

Total deposits dropped 2.5% y-o-y, consistent with the group’s approach to focus on lower cost current and savings accounts (Casa), and reduce higher cost fixed deposits. The ratio of Casa to total deposits rose significantly to 38.4% from 34.5% a year earlier, buoyed by improvements in Malaysia and Indonesia.

Although the full impact of the Covid-19 pandemic was not fully visible during the first quarter, the group nevertheless has been closely monitoring asset quality and proactively working with its clients.

To mitigate risks, added provisions have been made for possible impairments to credit portfolios which could be vulnerable in the foreseeable future. Consequently, net impairment losses for the quarter came in 60.7% higher as the group took the stance to ensure it remains well cushioned in the event of severe volatility in the operating environment in the months ahead.

The focus on digital banking helped push the value of monetary transactions via Maybank2u by 23.1%, 40.7% and 18.3% in Q1’20 in the three home markets of Malaysia, Singapore and Indonesia respectively, compared with a year earlier. Mobile banking via the app registered an even sharper rise with the value of monetary transactions rising 98.2% and 69.4% respectively in Malaysia and Indonesia. Similarly its contactless payment convenience, Maybank QRPay saw transaction volume grow over eight times in Malaysia.

Group president & CEO Datuk Abdul Farid Alias (pix) believes its Q1’20 results is not representative of the way it will perform for the rest of the year.

“The largest contributor came from the sell down of some of our liquid assets and fixed income instruments, which was above the optimal level. This resulted in a 53.2% rise in our net fee-based income, which then lifted our net operating income by 14.7%. While we still hold a large level of liquid assets, we need to strike a balance when selling them to ensure that it will not contract our NIM, particularly in the current declining interest rate regime globally,” he said in a statement today.

Farid expects the operating environment for the rest of 2020 to remain uncertain, and sensitive to the kinetics of the pandemic as well as the outlook for treatment and vaccines, which will have implications to public health and economic policies.

“We will continue to help our customers weather the strain from supply and demand disruptions as a result of the sub-optimal market environment caused by the restricted movement globally. This will be very challenging.

“In the meantime, Maybank will continue to be disciplined in our risk management practices to ensure we effectively manage asset quality levels. We will pursue growth selectively to maintain a healthy risk-return profile on our portfolios, as well as remain vigilant in protecting the health and safety of our employees and customers.”