By NG MIN SHEN / Pic By ISMAIL CHE RUS
Local lenders are on track to achieve satisfactory results for the rest of the year after most banks posted improved earnings for the third quarter ended Sept 30, 2018 (3Q18), despite economic and financial uncertainties at home and abroad.
Six of Malaysia’s eighth-largest banking groups posted higher earnings during the quarter except for Malayan Banking Bhd (Maybank), which was affected by global volatility, and Public Bank Bhd, which recorded a higher net profit a year ago due to a one-off gain.
AmInvestment Bank Bhd analyst and senior VP of domestic equity Kelvin Ong said the banks’ results so far have been within expectations, including those that saw declines due to the impact of global market and geopolitical tensions.
“There was a slight slowdown on topline growth, but profits are tracking within expectations.
“Non-interest income (NII) was affected by market activities, and the trend was seen not just at Maybank, but at other large banks as well.
“We were expecting NII to be weaker because of market volatility,” he told The Malaysian Reserve.
Domestic corporate activity eased this year as many corporates adopted caution and a wait-and-see stance before and after Malaysia’s 14th General Election (GE14) in May, particularly after the country voted in a new government for the first time in 61 years.
On the global front, financial markets took a hit from contagion fears sparked by currency and economic crises in emerging markets (EMs), as well as from less accommodative US monetary policies and fresh trade war concerns.
The FTSE Bursa Malaysia KLCI (FBM KLCI), which closed 16.48 points or 0.97% lower at 1,679.86 last Friday, has lost 1.78% since the start of the year and 4.98% since May 14, the day markets reopened after GE14.
The ringgit — which has fallen 0.67% against the US dollar since Jan 2 this year — is likely to continue depreciating as trade tensions continue to weigh particularly on EMs.
“Going forward, the market is expected to remain volatile, so investment income, trading income and investment banking income will remain challenging for all banks. But we have already factored this into our expectations,” Ong said.
On how long the slowdown will last, he said “earnings are still decent” as banks continue to lower operating expenses and provisions, while lenders’ results for the rest of the year should be within expectations in the absence of significant adverse events.
“For the full year, we already factored in the slowdown in loans, as well as for NII to be softer. But provisions and asset quality are still holding up.
“So, despite the topline slowdown, banks should deliver satisfactory results as long as there is no deterioration in asset quality,” Ong said.
Maybank’s net profit slipped 3.4% to RM1.96 billion in 3Q18 from RM2.03 billion last year, largely on weaker net operating income as continued global market volatilities dampened economic growth and demand from key segments, especially corporates.
Revenue at South-East Asia’s fourth-largest lender by assets rose 4.1% to RM12.06 billion from the RM11.59 billion registered a year ago.
CIMB Group Holdings Bhd recorded a 4.4% rise in earnings to RM1.18 billion in 3Q18, from RM1.13 billion a year earlier, on improvements in cost management and across all operating segments except for wholesale banking.
The group’s wholesale banking division saw its profit before tax plunge 41.7% across all wholesale segments, given the weaker capital markets.
Quarterly revenue slid 6.3% to RM4.14 billion from RM4.42 billion last year.
Public Bank’s 3Q18 earnings declined 1.4% to RM1.38 billion from RM1.4 billion a year ago, attributed largely to a one-off capital gain of RM42.9 million in respect of investment included in 3Q17’s results.
Excluding the one-off capital gain in the previous year, the country’s third-largest bank by assets and second-largest by market capitalisation said its net profit for 3Q18 would have grown by 1.6%.
For 3Q18, the bank’s revenue was 5.8% stronger at RM5.62 billion versus the RM5.31 billion achieved in 2017.
RHB Bank Bhd’s net profit jumped 18.4% to RM578.69 million in 3Q18 from RM488.83 million previously, attributed to higher income from Islamic banking and lower allowance for credit losses.
Revenue expanded 8.4% to RM3.2 billion from RM2.96 billion a year earlier.
Hong Leong Bank Bhd posted a double-digit growth in net profit for 3Q18, with earnings up 10.6% to RM706.92 million from RM638.97 million previously on strong NII, cost control and lower impairment allowances.
Revenue improved 5.9% to RM1.25 billion compared to RM1.18 billion previously.
AMMB Holdings Bhd’s (AmBank) net profit climbed 5% to RM348.15 million in its second quarter ended Sept 30, 2018 (2Q19), from RM331.47 million last year, mainly led by higher NII and Islamic ban-king income.
Revenue grew 8.9% to RM2.31 billion from RM2.13 billion in the previous year.
Alliance Bank Bhd’s earnings jumped 14.4% to RM140.52 million in its 2Q19 from RM122.8 million last year, its highest quarterly net profit in three years, on stronger net income.
The bank’s revenue was 2.5% stronger at RM800.26 million against RM780.49 million the year prior.
Affin Bank Bhd, the smallest of the eight players, saw net profit rise more than threefold to RM144.56 million in 3Q18 from RM39.9 million last year, underpinned by better income from its commercial banking segment.
Revenue for the three months surged 51.3% to RM496.25 million versus RM327.95 million a year earlier.