2017 — a record-breaking year for local banking industry

Nation’s 3 largest lenders based on assets Maybank, CIMB, Public Bank post record figures last year

BY ALIFAH ZAINUDDIN / Graphic By TMR

Local lenders rebounded from a lacklustre 2016 with Malaysia’s three largest banks based on assets posting record figures as provisions thinned, non-interest income grew and cost-cutting measures sparked the revival of the sector.

Malayan Banking Bhd (Maybank) reached record earnings of RM7.52 billion for the January-December 2017 period compared to RM6.74 billion posted in 2016.

Revenues at the Permodalan Nasional Bhd’s majority owned lender rose to RM45.58 billion for the period under review compared to RM44.6 billion recorded in the January-December 2016 period.

Pretax profit crossed the RM10 billion mark at RM10.1 billion against RM8.84 billion recorded in the financial year 2016 (FY16), the first time by the fourth-largest lender in South-East Asia.

Rival CIMB Group Holdings Bhd reported the highest ever pretax profit of RM6.11 billion on the back of record operating income of RM17.63 billion.

Net profit at the lender, which is 30%-owned by Khazanah Nasional Bhd, rose to RM4.48 billion for the January-December 2017 period, a 25.8% increase compared to RM3.56 billion recorded in 2016.

Earnings for the final three months of 2017 rose 24.1% to RM1.06 billion from RM854.39 million, boosted by non-interest income and improvements in consumer and wholesale banking.

CIMB, South-East Asia’s fifth-largest lender, also recorded a 9.7% jump in revenues to RM17.63 billion in 2017 against RM16.07 billion recorded in 2016.

Growth at the fifth-biggest listed firm on Bursa Malaysia was boosted by higher non-interest income on improved capital market activity, fee and net interest income.

Public Bank Bhd, the second-largest lender based on market value, posted a record pretax profit of RM7.12 billion for FY17, surpassing its previous record of RM7 billion.

The country’s second-largest lender based on market capitalisation recorded a net profit of RM1.49 billion in the fourth quarter ended Dec 31, 2017, compared to RM1.48 billion posted in the same period of 2016.

For the full financial year, the lender, which is majority- owned by tycoon Tan Sri Teh Hong Piow, recorded a net profit of RM5.47 billion, higher than RM5.21 billion recorded the year before.

Market capitalisation of the three biggest lenders — Maybank, Public Bank and CIMB — already commands RM268.9 billion from Bursa Malaysia’s RM1.96 trillion market capitalisation.

The strong overall performance of the financial stocks helped Bursa Malaysia Financial Index reach a 52-week high of 18,319.75 compared to a low of 15,012.5.

Inter-Pacific Research Sdn Bhd head of research Pong Teng Siew said the favourable income performance has allowed banking stocks to rank ahead of the old favourite tech sector in 2017.

“For a long time, the tech sector has been the prime pick, but in 2017, the banks pulled ahead and this was largely premised on the rate hike.

“We may continue to see a rate hike this year by Bank Negara Malaysia, and this will further boost banks’ lending margin,” Pong told The Malaysian Reserve.

In addition to the Overnight Policy Rate, Pong said the surge in foreign investment inflows of up to RM10 billion last year had also contributed to the higher preference for banking stocks.

“We had the best spell of foreign inflows in 2017 and a lot of these inflows went into banking stocks. They had a large capitalisation and they were liquid. They fitted investors’ bill perfectly,” he said.

Areca Capital Sdn Bhd CEO Danny Wong Teck Meng said the performance of the banking sector has generally met all expectations.

“Overall, the banks have met most projections because of the interest-rate hike, which could go for another round of increase, if inflation is more modest than we thought.

“For that reason, we think there are more upsides on banking stocks as we move further into 2018,” Wong said.

He added that improved earnings in the banking sector will continue to attract foreign investors to the local exchange as conventional banks constitute a dominant portion of the index, with a total market capitalisation of RM377.3 billion.