KUALA LUMPUR: Malayan Banking Bhd (Maybank) is expected to perform better in the second half of the year despite the end of the automatic loan moratorium period and low interest rate environment.
Group president and CEO Datuk Abdul Farid Alias believes the worst is over for the bank on the back of the improvement in recent economic data. “Based on the recent data, the economy is expected to improve but that depends on our ability to contain the coronavirus (Covid-19) pandemic, ” he told reporters at Maybank’s second quarter results briefing yesterday.
He said the substantial improvement in the Purchasing Manager’s Index (PMI) and mobility index for many countries implied that economic activity was improving.
Farid pointed out that the bank’s performance in the first half of the year was the reflection of an affected economic environment that saw business and household activity frozen by measures taken to contain the spread of Covid-19. Maybank, the country’s largest bank by assets, saw its net profit from April to June fall below RM1bil as the group booked in the impact from the MCO as well as a reduction in interest rates across its operating countries due to the Covid-19 fallout.
For the second quarter ended June 30, the bank’s net profit plunged 51.55% to RM941.73mil from RM1.94bil due to higher allowances for impaired loans. Maybank’s revenue for the quarter declined to RM11.79bil from RM13.05bil previously.
Its net impairment loss for the quarter rose to RM1.74bil compared with RM452.3mil a year earlier as the Group maintained a prudent stance and increased its forward-looking assumption provisioning, given the heightened possibility of a drawn-out pandemic which is expected to further affect businesses and individuals globally.
Maybank chairman Datuk Mohaiyani Shamsudin said: “The quarter under review has been one of the most challenging we have experienced as a group and unfortunately, the outlook continues to remain uncertain given that a vaccine has yet to be found, although there are some indications of green shoots.”
“Notwithstanding this, we are encouraged that our core business operations have progressed unhindered throughout this period, even as we have been rethinking our strategy for the future.”
Due to the uncertainty of the current environment, Maybank declined to propose an interim dividend for the first half of the year ended June 30 as part of its plan to prioritise capital and liquidity preservation.
Cumulatively, for the first six months of this year, Maybank posted a 20% drop in net profit to RM2.99bil from RM3.75bil a year earlier on the back of lower revenue at RM25.01bil compared with RM26.03bil previously.
In terms of loans growth, Maybank said its Malaysia operations recorded a steady loans growth of 4.4% year-on-year as at June 30 2020, although this was offset by an 8.4% contraction in its overseas market.
This has resulted in a marginal 1% dip in the group’s gross loans from a year earlier.
Due to the uncertainties in outlook, Maybank has revised its return on equity to about 7.5% for this year arising from Covid-19 impact to the group’s income and provisioning.
Meanwhile, Farid expected that the banks’ net interest margin (NIM) to compress by a wider 20 basis points (bps) for this year to incorporate the latest rate cuts as well as the net modification loss impact of RM314mil from the loan payment moratorium.
“If there is going to be another 25bps cut in the overnight policy rate by the Bank Negara, we are expecting another contraction of 1bps to 2bps to our NIM, ” Farid said.
Notably, for this year the central bank has cut its OPR by four times to 1.75% to boost the economy from the Covid-19 fallout.
“While we are not expecting another OPR cut this year, we believe there is still room for another rate cut, ” Farid said.
Shares of Maybank closed unchanged RM7.46 yesterday.
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