Maybank posts record earnings, braces for tough FY20

27 Feb 2020 / 17:26 H.

KUALA LUMPUR: Malayan Banking Bhd posted a net profit of RM2.45 billion for the fourth quarter ended Dec 31, 2019, a 5.3% increase from RM2.33 billion recorded in the previous corresponding quarter, boosted by robust performances of its community financial services, Islamic banking and insurance & takaful segments.

This came on the back of a net gain in investment income of RM185.5 million for the quarter, as compared to a net loss in investment income of RM352.6 million in Q4 18.

Revenue rose 6.1% to RM12.98 billion, from RM12.23 billion.

The group has proposed a final dividend of 39 sen per share, which together with the interim dividend of 25 sen per share, takes the full-year dividend to 64 sen per share. This translates into a full-year dividend payout ratio of 87.8%, amounting to RM7.19 billion.

For the full year, Maybank’s net profit rose 1% to a new high of RM8.2 billion, from RM8.11 billion a year ago, while revenue was up 11.7% to RM52.84 billion, from RM47.32 billion previously.

The group achieved a record net operating income of RM24.74 billion for FY19 on the back of a 10.7% rise in net fee-based income and a 2.2% improvement in fund-based income, as a result of higher contributions from all business sectors led by the insurance & takaful business.

Group gross loans expanded 1.2% in FY19, contributed by a healthy growth in Malaysian operations, where it outpaced the industry with a 4.9% expansion.

Group deposits, meanwhile, expanded 1.6%, in line with loans expansion, led by Singapore at 4.6% and Malaysia at 2.2%. The Singapore and Indonesian markets saw a decline by 3.9% and 8.2% respectively, mainly as a result of write-offs and repayments.

Consequently, net interest margin for FY19 was only marginally lower by 6 basis points to 2.27%, compared with 2.33% in FY18.

Gross impaired loan ratio was higher at 2.65% as at December 2019 against 2.41% in December 2018 amid challenging economic environment.

Looking ahead, Maybank is expecting a challenging FY20 due to external and internal political disruptions, the US-China trade war and uncertainty over the length of the Covid-19 outbreak.

Speaking to the media at the group’s financial results briefing today, group president and CEO Datuk Abdul Farid Alias said Maybank foresees a potential compression on its net interest margin (NIM) of up to five basis points this year.

“We also see a cost-to-income ratio between 46-47%, a net credit charge of 45-50 basis points including the initial impact from the Covid-19 outbreak and an return on equity between 10-11% on slower economic growth and a lower interest rate environment,“ he said.

For FY19, Maybank saw a marginal reduction in its NIM by six basis points to 2.27% from 2.33% in FY18.

Elaborating further on the impact seen from the Covid-19 pandemic, Farid said the overall exposure of the group’s loan portfolio to sectors vulnerable to the effects of Covid-19 is less than 10%.

“That said, the impact is real. There will be some impact to our earnings but that is hard to quantify. I’m hoping for a V-shaped recovery and for the situation to be contained soon,“ he said, noting that it is too early to say how much in terms of loan reliefs has been disbursed to affected customers.

Meanwhile, on the expected rate cut in the Overnight Policy Rate, Farid said it would have an effect on the group’s NIM. “We have many other tools to mitigate the impact so as the year goes we’ll see how certain variables play out.”

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