Maybank’s NIM under pressure if Malaysia’s central bank cuts rates again

Taking signals from central banks all around the world, we expect BNM to have another OPR cut, according to group president


MALAYAN Banking Bhd (Maybank) has warned that another policy rate cut — which is expected later this year — would impact its net interest margin (NIM) for the 2019 full financial year (FY19).

The country’s largest bank based on assets yesterday reported a slight drop in earnings for the April through June 2019 period due to higher interest expense and operational expenses.

Group president and CEO Datuk Abdul Farid Alias (picture) said the bank expects another, at least 25 basis points (bps) policy rate cut later this year.

“Taking signals from central banks all around the world, we expect Bank Negara Malaysia (BNM) to have another Overnight Policy Rate (OPR) cut.

“With this, we expect a rather flattish NIM due to the additional pressure from the OPR cut,” he said in Kuala Lumpur yesterday.

NIM for the first half of 2019 (1H19) was 9bps lower at 2.24%, following the OPR revision this year.

The country’s largest company based on market capitalisation, posted a net profit of RM1.94 billion for the second quarter ended June 30, 2019, a 0.9% decrease compared to a year ago due to higher interest expense.

Revenue for the quarter rose 13.4% to RM13.05 billion from RM11.51 billion a year ago.

Abdul Farid said overhead expenses during the period increased by RM142.9 million or 5.3% year-on-year (YoY).

“The increase was mainly contributed by the rise in personnel expenses, higher establishment costs and marketing expenses of RM28.6 million,” he said.

Abdul Farid expects the 2019 financial performance to be satisfactory, but is lowering its target for return on equity (ROE) to between 10% and 10.5% for this year due to the lower interest-rate environment and slowing economic growth in key operating markets.

South-East Asia’s fourth-largest bank said earnings per share for the quarter slipped to 17.46 sen from 17.94 sen previously.

Maybank declared a dividend of 25 sen per share, payable within three months.

For the six months ended June 30, Maybank’s net profit slipped to RM3.75 billion from RM3.83 billion in the same period a year ago.

Revenue, however, rose to RM26.03 billion from RM23.02 billion previously.

Net operating income was 1% higher at RM11.75 billion, lifted by a 1% rise in net fund-based income to RM8.47 billion on the back of a 4.6% growth in group loans.

Net fee-based income was 1.1% higher at RM3.28 billion, largely helped by the insurance segment.

Gross loans for 1H19 expanded by 4.6% YoY with a healthy growth recorded across all markets.

Group deposits increased by 3.9%, led by a strong increase of 10.3% and 4.6% in Indonesia and Malaysia respectively.

“In Malaysia, net fee-based income registered a growth of 3.6%, attributable to non-retail segments’ foreign-exchange income.

“Loans to consumer and retail small and medium enterprise (SME) segments remained robust — led by retail SME with an 11.9% YoY growth, mortgages (9%), unit trust loans (6.7%) and automobile financing (4.5%),” he said.

Maybank’s share price rose four sen to close yesterday’s trading at RM8.57.