PETALING JAYA: With the expectation of a more challenging second half of 2021, Malayan Banking Bhd (Maybank) is working towards maintaining sufficient buffers for unexpected events.
The banking group, which is South-East Asia’s fourth-largest bank by assets, said yesterday it remains cautious on potential asset quality slippages in the coming months.
This is due to the uneven economic recovery for some key Asean markets as a result of the continued lockdowns in the second half-year and the extension of repayment assistance packages.
It is worth noting that Maybank’s repayment assistance to its clients has increased over the past several months, including because of the loan moratorium in Malaysia that took effect in July.
About 27.1% of Maybank’s outstanding loan balance in Malaysia is under relief programmes as at Aug 13, marking an increase from 16.9% as at May 10.
However, Maybank’s operations in Indonesia suffered a 15% decline in gross loans, in comparison to industry’s muted growth of 0.4%.(File pic shows Maybanks HQ in KL)
In Indonesia, about 15.3% of outstanding loan balance is under relief programmes as at Aug 13, a slight increase from 13.4% as at May 10.
However, in Singapore, the size of loans under relief programmes has declined to 6.1% as at Aug 13 from 6.7% as at May 10, given the improvement in domestic Covid-19 situation.
Amid the challenging environment, Maybank group president and chief executive officer Datuk Abdul Farid Alias expects weaker loans growth in the third quarter of financial year 2021 (FY21), following a slower growth in the second quarter ended June 30.
While Maybank’s gross loans in the January-June 2021 period grew by 4.1%, which Abdul Farid said was above industry growth, the expansion was primarily driven in the first three months of the year.
However, the momentum is expected to pick up once again in the fourth quarter, he said.
The banking group, whose net profit more than doubled in the second quarter of FY21 year-on-year (y-o-y), said it will continue with its strategies of focusing on risk management, strengthening its capital and growing its current account and savings account (CASA) deposit base.
“Our strong liquidity and capital positions have given us the ability to support our customers through this prolonged pandemic while at the same time, enabled us to pursue growth opportunities across the region and undertake the necessary investments to prepare ourselves for the future.
“Moving forward, we will continue to strengthen our digital capabilities and pursuit of innovation, as well as accelerate our sustainability commitments which we believe will provide us the competitive edge in pursuing our growth agenda,” Abdul Farid told reporters at a virtual briefing yesterday.
Maybank’s net profit in the second quarter of FY21 more than doubled to RM1.96bil from RM941.7mil in the corresponding quarter last year, underpinned by loans growth and a wider net interest margin (NIM) resulting from a more cost-effective funding mix and lower impairments.
The banking group told Bursa Malaysia that its revenue declined by 3.87% y-o-y to RM11.34bil as compared to RM11.79bil in the corresponding quarter last year.
Pre-provisioning operating profit in the second quarter increased by 10.6% y-o-y to RM3.25bil. However, on a quarter-on-quarter (q-o-q) basis, it tumbled by 18.7% from RM4bil in the first quarter.
The lower q-o-q performance was mainly owing to a decline in net fee-based income arising from the impact of the resurgence of the Covid-19 pandemic as well as higher marked-to-market losses and overhead expenses.
In the second quarter of FY21, the bank’s net operating income was 9.3% higher year-on-year at RM6.17bil on the back of a 26.4% improvement in net fund-based income resulting from loans expansion and strong growth in low-cost CASA deposits.
The improved net fund-based income offset a 27% decline in net fee-based income resulting from the impact of movement restriction in the region, according to Maybank.
A dividend of 28 sen per share was announced under the dividend reinvestment plan, comprising 14 sen per share to be paid in cash and the remainder to be either reinvested in new shares or paid in cash.
Cumulatively, for the first six month to June 30, the banking group’s net profit rose to RM4.35bil compared to RM3bil in the first half of 2020, while revenue dipped to RM23.56bil from RM25.03bil in the comparative period.
Net impairment losses in the first half were lower at RM1.44bil compared with RM2.77bil in the year-ago period.
In Malaysia, the bank’s gross loans expanded 4.7%, outpacing industry growth of 3.4%. Meanwhile in Singapore, gross loans growth was higher at 8.7%, surpassing industry’s 2.1% expansion.
However, Maybank’s operations in Indonesia suffered a 15% decline in gross loans, in comparison to industry’s muted growth of 0.4%.
As for gross deposits, at the group level, it expanded by 5.5% and Malaysia showed the most expansion at 4.7%, followed by Singapore (3.7%) and Indonesia (1.5%).
CASA improved to 45.4% in June 2021 from 40.2% in June 2020.
Maybank said it continued to maintain a healthy liquidity position with an loan-to-credit ratio of 137.2% and loan-to-deposit ratio of 89.3%.
Total capital ratio as at June 2021 stood at 17.42%.
Maybank also pointed out that it remains as one of the best capitalised banks in the region, with its fully loaded CET1 ratio at 14.20% after interim dividend and assumption of 85% reinvestment rate.
“The group registered an improvement in asset quality with its gross impaired loans ratio declining to 2.18% in June 2021 from 2.49% in June 2020, contributed by write-offs, repayments and recovery proceeds received.
“Loan loss coverage as at June 2021 continued to register further improvement, reaching 114.8% from 90.5% a year earlier as a result of the higher provisioning undertaken during the year as well as the lower formation of new impaired loans,” it added.
Looking ahead to the remaining months of FY21, Abdul Farid said Maybank will leverage fee-based income opportunities in wealth management, global markets, investment banking, asset management and insurance.
It will also accelerate product rollouts on its digital platform to increase market penetration and generate fee-based revenues.
As for balance sheet management, Abdul Farid said capital and liquidity conservation will remain a key focus, given lingering uncertainty in the environment.
He expects the banking group’s NIM to expand between 10 to 15 basis points in FY21, supported by lower deposit cost and the assumption of no further interest rate cuts in 2021.