KUALA LUMPUR : The banking sector’s “Big 4” have performed as expected although shrinking Singapore-based assets clouded their results last year, said analysts.
They are cautious about the outlook for Malayan Banking Bhd (Maybank), CIMB Group Holdings Bhd, Public Bank Bhd and RHB Bank Bhd this year.
Expecting subdued loan growth, analysts said there would be pressure on net interest margin (NIM).
“Results were mixed but in general, the Malaysian banking sector came in within our expectations this year,” said an MIDF Research analyst who did not want to be named.
“There were some surprises, such as the Overnight Policy Rate cut and higher-than-expected provisions and impairment, especially on some accounts in the oil and gas (O&G) sector.
“These have impacted banks with NIM compression and lower earnings. However, we believe that these impacts have since normalised.”
The analyst added that the pick-up in loan growth momentum as well as expansion in some current account savings account franchise and improved margins in the fourth quarter of last year were positive surprises.
Kenanga Investment Bank Bhd equity research vice-president Ahmad Ramzani Ramli said the worst could be over for the industry.
“The only surprise was the higher impairments from RHB and Maybank due to their exposure in Singapore and the prudential measures taken by both banks.
“The impairments, however, were only a short-term impact as these loans were classified reschedule and restructure but declared performing later once the O&G sector stabilised. With oil prices looking stable, we believe this will not be a concern,” Ramzani told NST Business.
AmBank Research domestic equity senior vice-president Kelvin Ong said despite concerns of weaker consumer confidence and lower consumer spending amid higher inflation, the industry loan growth continued to expand by 5.3 per cent last year.
This was driven by an expansion in retail loans, albeit at a slower rate, as well as recovery in business loan growth in the fourth quarter of last year.
“This was evidenced by a slower domestic retail loan growth for Public Bank while the larger capitalised banks, CIMB and Maybank, registered higher loan growths in the final quarter of last year, underpinned by a stronger momentum in corporate loans.
“In contrast, RHB Bank reported a contraction in corporate loans, impacted by repayments, while retail loans grew at a slower pace last year than in 2015.”
He said NIMs were still expected to contract this year, contributed by pressure on funding cost from keen deposit competition. This is despite of the NIM improvement seen in the fourth quarter for all banks.
Ong expects improved core earnings on a calendarised basis by 6.4 per cent, from a 0.3 per cent contraction last year. This will be contributed by lower provisions and savings in operating expenses from cost initiatives.