Maybank sees 6% to 7% growth in gross loans

Khairussaleh said that investment banking activities will improve in 2024 and this will help lift Maybank’s core fees.

KUALA LUMPUR: After a strong 9.2% loan growth in 2023, Malayan Banking Bhd (Maybank) foresees its gross loans to expand further by 6% to 7% this year.

The banking group, which is the largest in Malaysia by asset value, said the growth is likely to be broad-based across its three markets – Malaysia, Singapore and Indonesia.

Group president and chief executive officer Datuk Khairussaleh Ramli told reporters that Maybank’s gross loans in Malaysia will benefit from continued strong consumption, pick-up in business activities and the expected economic growth of 4.4% in 2024.

He also said the increase in investments into the country would be another key driver.

“When these investments start being implemented, there will also be opportunities for us to help finance the projects.

“In Indonesia, we remain optimistic on small and medium enterprises and large corporations, as opposed to state-owned enterprises. Meanwhile, in Singapore, our loan portfolio will also benefit from the corporations.

“We have been able to penetrate local corporations fairly well and we believe that SMEs will also be a growth area for us,” said Khairussaleh at a briefing on the group’s financial year 2023 (FY23) results.

In FY23, the strongest loan growth was seen for the Singapore market at 8.7%, followed by Malaysia (6.7%) and Indonesia (6.2%). Total loans grew by 9.2% to RM640.75mil.

Khairussaleh noted that Maybank’s overall loan growth in 2023 had partly benefited from foreign exchange gains due to the stronger Singapore dollar and Indonesian rupiah.

Commenting on non-interest income (NOII), Khairussaleh foresees further improvement in FY24, partly driven by higher core fees.

“In 2023, our core fees grew by 6% to 7% and we expect it to be about the same rate this year,” he said.

Khairussaleh pointed out that investment banking activities will improve in 2024 and this will help lift Maybank’s core fees.

“Our wealth management business, be it conventional or Islamic, will also do well this year.

“Payments will also be a key driver. We are big in Malaysia with close to 70% of all QR payments done through Maybank,” according to him.

On net interest margin (NIM), Khairussaleh anticipates a further compression of five basis points (bps) in FY24. In FY23, the NIM compressed 27 bps on higher funding costs and continued deposit competition.

Maybank reported yesterday that its net profit for the fourth quarter of FY23 (4Q23) increased by 8.28% year-on-year (y-o-y) to RM2.39bil.

Revenue rose by almost 14% y-o-y to RM17.13bil.

Maybank’s net interest income and Islamic banking income for 4Q23 decreased by RM255.3mil or 4.6% y-o-y to RM5.24bil.

However, its insurance and takaful service result for the quarter ended Dec 31, 2023 increased by RM243.5mil y-o-y to RM283.8mil.

The banking group’s other operating income in 4Q23 increased by RM98.2mil to RM1.9bil.

The increase was mainly due to unrealised mark-to-market gain on revaluation of derivatives of RM1.7bil in 4Q23 as compared to unrealised mark-to-market loss of RM656.2mil in 4Q22.

In addition, the stronger other operating income was supported by a net investment income of RM75.9mil and higher fee income of RM78.5mil.

On the other hand, the group’s fourth-quarter overhead expenses increased 15.3% y-o-y to RM3.62bil.

The increase in overhead expenses was mainly due to higher personnel expenses, administration and general expenses as well as higher establishment costs.

“The group’s net allowances for impairment losses on loans, advances, financing and other debts increased by RM162mil or 53.6% to RM464.2mil as compared to the previous corresponding quarter ended Dec 31, 2022,” Maybank said.

It is noteworthy that Maybank recorded net allowances impairment losses on financial investments of RM2.2mil in 4Q23, against a net writeback of RM170.9mil previously.

As a result of the increased profitability in the fourth quarter, Maybank’s earnings per share rose to 19.8 sen in 4Q23. The group declared a 31 sen dividend per share for the quarter under review.

Cumulatively, for the 12-month period ended Dec 31, 2023, Maybank’s net profit rose by 17.45% y-o-y to RM9.35bil.

The banking group’s revenue increased by 30.46% y-o-y to RM64.47bil.

The better results in FY23 were driven by higher operating income on the back of improved regional economic activities and significant improvement in net impairment provisions.

Net operating income grew by 3.3% to RM27.36bil, led by a strong 38.3% y-o-y increase in NOII from gains in investment and trading income, foreign exchange and higher core fees.

Net fund-based income, meanwhile, was lower by 6.6% as NIM compressed 27 bps due to higher funding costs and continued deposit competition, although the intensity subsequently moderated in the second half of FY23.

Group loans grew 9.2% y-o-y on the back of improvements in key home markets and business segments.

Deposits also expanded by 9% y-o-y, led by a growth of 13.5% in Singapore, 9.4% in Indonesia and 4.9% in Malaysia.

“Overhead costs expanded to RM13.39bil or 11.7% y-o-y on higher personnel costs, credit card-related fees due to higher billings, Right of Use assets depreciation and IT-related costs.”

As a result, the group’s pre-provisioning operating profit decreased by 3.8% y-o-y to RM13.97bil.

Maybank noted that its FY23 net impairment provisions fell 39.5% y-o-y to RM1.68bil following lower net loan provisioning by 16.3% to RM1.83bil on writeback for corporate borrowers and pre-emptive provisioning made in 2022, as well as a net writeback in financial investments and others of RM145.15mil.

“As a result, net credit charge off rate for loans decreased to 31 bps from 40 bps a year earlier.

“Gross impaired loans ratio improved by 23 bps to 1.34% from 1.57% year earlier while loan loss coverage remained strong at 124.9% from 131.2% in 2022.

“The group continues to undertake proactive engagement with clients facing financial challenges by assisting them in managing their commitments effectively,” it said.

Maybank declared a second interim dividend of 31 sen per share, which brought the full-year payout to 60 sen per share, representing a payout ratio of 77.4%.

The group continued to have robust capital and liquidity positions as at end-2023, with its common equity tier-1 ratio at 15.34% and liquidity coverage ratio at 142.1%.

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