Maybank lowers 2016 loan growth target

PETALING JAYA: Malayan Banking Bhd (Maybank), which saw a 5.4% drop in its third-quarter (Q3) net earnings, has cut its 2016 loan growth target to between 2% and 3% from the initial target of between 8% and 9%.
The revision comes after it registered annualised loan growth of only 2.9% for its Malaysian operations in the first nine months of the year, while its international operations saw a marginal contraction of 2.6% on softer economic conditions.
Maybank’s net profit was down to RM1.8 billion for the third quarter ended Sept 30, 2016 from RM1.9 billion, primarily due to a lower tax charge in the previous corresponding quarter.
Revenue slipped 0.8% from RM11.38 billion to RM11.29 billion.
For the first nine months of the year, Maybank’s net profit contracted 15.5% to RM4.38 billion from RM5.18 billion, due to higher provisioning in the first two quarters. Revenue came in at RM33.41 billion, 13.2% higher than the RM29.5 billion in the same period last year.
While Maybank expects its financial performance for 2016 to be satisfactory in a more challenging regional environment, it lowered its return on equity (ROE) target to between 10.5% and 11% from between 11% and 12%.
In a filing with the stock exchange, Maybank said the loan growth and ROE target revisions are premised on its selective asset growth this year, and it is mindful of potential asset quality weakness in a slowing economic growth environment in some of its key operating markets.
Maybank maintained its robust capital position with common equity tier-1 (CET1) ratio strengthening to 13.73% from 12.53% in December 2015, and total capital ratio of 19.07% from 17.49% (after proposed dividend and assuming an 85% dividend reinvestment rate).
It noted that net impairment losses narrowed significantly in Q3 to RM331 million compared with RM1.18 billion in Q2, although for the nine-month period, it was still higher at RM2.39 billion compared with RM1.49 billion a year earlier due to the impairments made in the first half of 2016, a significant portion of which was pre-emptory in nature.

Maybank’s asset quality improved in September 2016 to 2.22% from 2.34% in June 2016 while the group’s liquidity coverage ratio stood at 136%, well above Bank Negara Malaysia’s minimum requirement of 70% for 2016.
Maybank group president and CEO Datuk Abdul Farid Alias said the group has benefited from its diversified portfolio and geographical footprint that have helped the group in navigating the uncertain operating environment over the past few quarters.
“We are encouraged that our franchise remains sound across the region, and revenue continues to grow across all our business sectors. We intend to sustain this momentum, while at the same time, remaining disciplined in managing costs, mitigating risks and enhancing efficiency, to better position ourselves for sustained growth in the future,” he added.