Maybank’s 2Q earnings drop 52%

The group sees minimal losses ahead and says it will continue to prioritise capital and liquidity preservation

by NG MIN SHEN/ pic by ARIF KARTONO

MALAYAN Banking Bhd (Maybank) expects “very minimal” losses ahead from provisions taken to cushion the impact of the pandemic, after its earnings fell 51.5% in the second quarter ended June 30, 2020 (2Q20), due to high impairment allowances and modification loss.

The bank’s net profit slid to RM941.73 million in 2Q20 from RM1.94 billion a year earlier.

It recorded a Day 1 net modification loss of RM314 million for fixed-rate financing assumptions, while allowances for impairment losses on loans and financing surged 344.1% to RM1.74 billion.

Maybank group president and CEO Datuk Abdul Farid Alias (picture) said the bank has been approaching its customers to identify those who require further assistance once the moratorium ends, but the number of clients who have applied for further help is “small, percentage-wise”.

The situation applies to the entire banking industry, he added. “I’m looking at it as trying to understand Malaysia. By right, when we announce it, everyone should come and we get it done now. But at the end of the day, they all wait until the end of the month.

“The key task for us is to ensure that when the time comes, we can handle it and help them,” he said at a media briefing in Kuala Lumpur yesterday.

From now until end-September, many are expected to come back to the bank to discuss their financing plans, Abdul Farid added.

“So, will there be any more (net modification) loss? For unemployed individuals, companies, small and medium enterprises (SMEs) etc, maybe, but the amount will be very minimal,” he said.

As at Aug 14, 2020, the group had disbursed RM1.4 billion under the central bank’s Special Relief Facility scheme to SMEs.

Some 83% of its outstanding mortgages balance in Malaysia was under the moratorium, relief, or restructuring and rescheduling, while auto finance loans stood at 90.1% and SME loans at 85.6%.

Once the blanket moratorium expires on Sept 30, banks are mandated to provide a three-month moratorium extension and assistance to targeted groups.

The bank is also planning to maintain its dividend policy of paying out between 40% and 60% of earnings to shareholders, despite not declaring an interim dividend yet this year.

“We have a dividend policy that we’re trying to meet every year. That is something we have consistently delivered. There’s no difference for this year. We’ll see how things develop,” Abdul Farid said.

In a bourse filing yesterday, the banking group said it will continue to prioritise capital and liquidity preservation.

“The group is, therefore, not proposing an interim dividend for the six months ended June 30 as we are just beginning to emerge from the pandemic,” it said.

Maybank’s net impairment losses for 2Q20 rose to RM1.74 billion compared to RM452.3 million last year as it increased its forward-looking assumption provisioning amid the pandemic.

Quarterly revenue was 9.7% lower at RM11.79 billion against RM13.05 billion the year prior, while net interest income fell 6.9% to RM2.698 billion from RM2.9 billion previously.

Net interest margin stood at 1.95%, 24-basis-point (bps) lower year-on-year (YoY) and 28bps lower quarter-on-quarter due to interest-rate cuts and the modification loss.

Fee-based income rose 5% YoY, buoyed partly by better investment and trading returns.

Gross loans contracted by 1% as at end-June 2020, as the group’s 4.4% loan growth in Malaysia was offset by an 8.4% fall in its overseas markets.

Deposits rose 2.2%, led by 7% and 1.2% increases in Singapore and Malaysia respectively.