KUALA LUMPUR: Based on the recent result season, Maybank Investment Bank Research has trimmed its 2018 core operating/net profit growth on the banking sector to 3.7%/7% from 6.%/7.7% previously.
The research house said earnings expansion in the banking sector for the first half of 2018 was led primarily by lower credit costs while operating growth slowed 4% compared to the same period last year.
It added that 2Q18 was lacklustre with slightly faster loan growth. The net interest margin (NIM) expansion in 1Q due to the 25bps hike in the overnight policy rate dissipated as deposit competition increased.
"Coupled with a contraction in aggregate core NOII from weak capital market activity, cumulative core operating profit in 2Q18 was flat YoY/-2% QoQ.
"Positively though, ongoing credit cost improvement allowed aggregate core net profit to expand 7% YoY in 2Q18 and 10% YoY in 1H18."
Maybank Investment said it projects 4% half-on-half net profit growth in the second half of 2018.
The research house is expecting 2H2018 earnings to be relatively stable half-on-half with loan growth rising slightly as corporate lending increases.
The competitive repricing of deposits should also taper off, reducing pressure on NIMs, it said.
"Coupled with improved capital market activity which should support NOII, we estimate HoH core operating profit and net profit growth of 5% and 4% respectively."
For the remainder of the year, Maybank Investment has lowered its 2018 aggregate core operating profit growth to 3.7% from 6.0%, largely on account of weaker
NIM and weaker NOII.
Net profit growth forecast was also lowered to 7% from 7.7%.
"That we expect net profit to expand at a faster pace to operating profit is on the back of lower credit costs," it said.
Maybank Investment had lowered Malaysia's 2018 GDP growth forecast to 4.8% from 5.2% previously.
For 2019, the research house is expecting operating profit to expand at a faster pace of 5.7% YoY, primarily on expectation of relatively stable NIM and non-interest income.
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