Weak corporate loans could hit Maybank

By NG MIN SHEN / Pic By MUHD AMIN NAHARUL

Analysts are cautious on the financial prospects of Malayan Banking Bhd (Maybank) as the South-East Asia’s fourth-largest and Malaysia’s largest lender will announce its full-year 2018 financial results today.

Maybank’s earnings could be impacted by lower revenue and weaker non-interest income (NOII) in the fourth quarter ended Dec 31, 2018 (4Q18), said analysts.

Maybank’s profitability could be hit by a slowdown in revenue momentum, while being buffered by cost controls, a Bloomberg Intelligence (BI) report noted yesterday.

“Maybank’s profit growth could narrow on lower revenue, led by flat margins and muted corporate lending this year. Weak capital markets should continue to weigh on investment and trading income, dragging down NOII,” the report stated.

Similarly, RHB Research Institute Sdn Bhd stated that Maybank’s investment and trading income is expected to decline in 4Q18, which would drag NOII, although NOII and operating expenses could be compensated by possibly lower than expected loan provisions.

BI said Maybank’s 4Q18 loan growth is expected to remain flat at 4%-5%, while margins for 2018 are likely to decline from a year earlier.

It said corporate credit demand remains weak as the Pakatan Harapan government reviews key infrastructure projects, therefore loans are likely to be driven by consumer-related segments, while capital market activity weakness may have weighed on fee growth.

Sequentially, net interest margin (NIM) may have recovered marginally from 2.3% in 3Q18, though excess liquidityled weakness seen in 2Q18 may weigh on the lender’s full-year margin.

“NIM is likely to stabilise after rising three basis points in 3Q18 to 2.3%, a turnaround from the compression seen in the first half of 2018. Malaysia’s consumer loans should drive lending, while the corporate segment picks up momentum on better government clarity regarding infrastructure projects,” it said.

For 3Q18 which ended on Sept 30, 2018, Maybank’s net profit dropped 3.4% to RM1.96 billion from RM2.03 billion the year before, as its feebased income was impacted by lower investment and trading proceeds.

Continued global market volatilities dampened economic growth and demand from key segments — particularly corporates — although the bank’s 3Q18 revenue climbed to RM12.06 billion from RM11.59 billion the year prior.

For the first nine months of 2018, its net profit rose 7.4% to RM5.79 billion from RM5.39 billion recorded a year ago, while revenue was 3.8% higher at RM35.09 billion versus RM33.79 billion registered in the same period in 2017.

As at press time, Maybank’s stock had 11 ‘Buy’ calls, eight ‘Hold’ recommendations and three ‘Sell’ calls, with a 12-month target price of RM10.22. Analysts have lowered the target by 4.1% in the past three months.

The stock closed unchanged at RM9.54 yesterday for a market capitalisation of RM105.28 billion.