Maybank facing margins compression pressures

Maybank will reinforce our vision of humanising financial services to sustain our position in 2020, its chairman says


MALAYAN Banking Bhd (Maybank) was able to rely on a strong performance from its community financial services, insurance and takaful segments, as well as Islamic banking to post a 5.3% year-on-year (YoY) rise in earnings to RM2.45 billion for the fourth quarter ended Dec 31, 2019 (4Q19).

Revenue for the period rose 6.1% YoY to RM12.98 billion, while earnings per share stood at 21.79 sen.

The banking group proposed a final single-tier cash dividend of 39 sen per share which takes the full-year cash dividend to 64 sen per share or a payout ratio of 87.8%.

“While we are hopeful for a better year ahead, clouds of uncertainty continue to hover. This is expected to impact the economic outlook in the near term.

“Maybank will focus on innovation and service excellence, as well as reinforce our vision of humanising financial services to sustain our position this year,” Maybank chairman Datuk Mohaiyani Shamsudin said in a media briefing yesterday.

Group’s net profit for the financial year ended Dec 31, 2019 (FY19), increased 1% YoY to RM8.2 billion lifted by the 4Q19 net earnings.

Full-year revenue jumped 11.7% YoY to RM52.84 billion.

Malaysia’s largest financial group achieved a record net operating income of RM24.74 billion in FY19 on the back of a 10.7% rise in net fee-based income and a 2.2% improvement in fund-based income.

The increase is due to higher contributions from all business sectors led by its group insurance and takaful business.

Gross loans expanded by 1.2% last year contributed by growth in Malaysian operations where it outpaced the industry with a 4.9% expansion.

Deposits expanded 1.6% in line with loans expansion led by 4.6% (Singapore) and Malaysia at 2.2%.

Maybank’s loan growth was 7.2% led by an 11.6% growth in retail small and medium enterprises and consumer business by 7.2%.

Mortgage was the largest contributor to consumer loans with a growth of 11.6%.

The group’s gross impaired loan ratio stood at 2.65% in 4Q19 versus 2.41% in the previous year’s corresponding quarter.

Non-performing loan (NPL) ratio stood at 2.2% in 4Q19 compared to 1.74% in 4Q18.

Group CFO Datuk Amirul Feisal Wan Zahir (picture) said the higher NPLs were due to some new impairments, as well as existing ones and weaknesses related to trade and external environment.

“In terms of outlook for 2020, it is harder to anticipate because we have an environment that we did not anticipate at the beginning of the year. We did come up with some guidance,” he said.

For FY19, the group’s net interest margin (NIM) was reduced six basis points (bps) YoY to 2.27% from 2.33% in the previous year.

Group president and CEO Datuk Abdul Farid Alias said Maybank is looking at a potential NIM compression of up to 5bps in 2020.

“We are also looking at a cost-toincome ratio between 46% and 47%, a net credit charge of 45bps to 50bps including the initial impact from the Covid-19 outbreak and a return on equity between 10% and 11%,” he said.

Abdul Farid added that Maybank’s loan portfolio exposure to sectors that would be affected Covid-19 is less than 10%.

“We feel it is our duty to come up with ideas to help those customers that have been affected. We do not know how long this is going to take but based on our experience, if we are able to contain it faster, then it should be a V-shaped recovery,” he added.