loan growth

 
 

RAM ratings: Banks expect slower loan growth

KUALA LUMPUR, June 13 — The recent quarterly financial results from local banks showed softer earnings, weighed down by sluggish loan growth and compounded by narrower net interest margins (NIM), said RAM Ratings Services Bhd. RAM’s co-head of…


Chinese vice-premier urges more support for economy as trade war bites

SHANGHAI, June 13 — Chinese regulators should step up support for the economy and keep ample liquidity in the financial system, Vice-Premier Liu He said today, suggesting Beijing would soon unveil more policies to bolster growth amid rising US…


China’s Vice Premier Liu calls for more measures to support economy

SHANGHAI: Chinese regulators should step up support for the economy and keep ample liquidity in the financial system, Vice Premier Liu He said on Thursday, suggesting Beijing would soon unveil more policies to bolster growth amid rising U.S. trade pressure.

Beijing has plenty of policy tools and is capable of dealing with various challenges, Liu said at a financial forum in Shanghai.

Despite a slew of support measures and policy easing since last year, China’s cooling economy is still struggling to get back on firm footing, and last month’s sudden escalation in U.S.-Sino tensions has raised fears of a full-blown trade war that could trigger a global recession.

Liu’s comments came a day after data showed China’s credit growth was weaker than expected in May, reinforcing market expectations that more monetary easing is needed. Factory activity contracted in May and imports fell the most in nearly three years, highlighting soft demand.

“At present, we do have some external pressures, but those external pressures will help us boost our self-reliance in innovation and accelerate the pace of high-speed development,” said Liu, who is also the lead negotiator in the U.S.-China trade talks.

The government will roll out more strong measures to promote reforms and opening up, added Liu.

People’s Bank of China chief Yi Gang said last week that there was “tremendous” room to make policy adjustments if the trade war worsens.

Earlier on Thursday, China Daily, citing economists, said China is expected to adjust money and credit supply in coming weeks, including cuts to interest rates or reserve ratio requirements, to counter “downside risks” if trade tensions escalate.

Further cuts in banks’ reserve requirement ratios (RRR) were already expected this year, especially after the trade conflict escalated last month. Both sides hiked tariffs on each other’s goods, and Washington is threatening more.

Last month, the PBOC stepped up efforts to increase loan growth and business activity, announcing a three-phase cut in regional banks’ reserve requirements to reduce financing costs for small and private companies.

It has now cut RRR times six since early 2018, and has also guided short-term interest rates lower.

Unlike previous downturns, however, the central bank has been reluctant to cut benchmark interest rates so far. Analysts believe it has held off on more aggressive measures due to concerns that such a move could risk adding a mountain of debt leftover from past stimulus sprees.

Sources told Reuters in February that the PBOC considered a benchmark rate cut a last resort. But some analysts now think one or more cuts are likely if the trade dispute spirals out of control and the U.S. Federal Reserve starts cutting its rates, giving the PBOC more room to manoeuvre.

Some analysts believe the chances of a trade deal are receding, with both sides showing signs of digging in. But U.S. President Donald Trump has said he plans to meet his Chinese counterpart Xi Jinping at a G20 summit later this month.

CURRENCY RISKS

More forceful easing could also trigger capital outflows and add pressure on the Chinese yuan.

The yuan has fallen nearly 3 percent since the trade flare-up last month and is nearing the closely watched 7 per dollar mark, a level last seen during the global financial crisis a decade ago.

“China is capable and confident of maintaining stable operation of the foreign exchange market and keep the yuan basically stable at reasonable and balanced levels,” Pan Gongsheng, head of the State Administration of Foreign Exchange, said at the forum.

Citing experts, China Daily said financial institutions were facing tighter liquidity in June, and said authorities want to spur faster credit growth to meet economic growth targets.

Beijing has set a growth target of around 6% to 6.5% for this year, easing from 6.6% in 2018, which was the slowest rate of expansion the country has seen in nearly 30 years.

Analysts at Bank of America Merrill Lynch believe China’s GDP growth could fall to 5.8% this year and 5.6% in 2020 if the trade war intensifies, and expects Beijing to respond with four benchmark rate cuts, more RRR cuts, consumption subsidies and measures to stabilise employment.

On Monday, the government announced steps to give local governments more financing flexibility so they can increase infrastructure spending, a key part of the stimulus plan that has not revived investment as quickly as some China watchers had expected.

The escalating trade war has gone beyond tariffs as the two countries increase pressure on each other to cede ground.

Chinese state media has warned that Beijing could use rare earths for its next strike. The United States relies on China for supplies of the rare earths to make a host of high-tech products.

China is also the biggest holder of U.S. government debt, with about $1.12 trillion in U.S. Treasuries, stirring talk that Beijing could start dumping U.S. bonds.

China is a responsible investor in global financial markets, Pan said. – Reuters


China’s vice premier calls for more measures to support economy

SHANGHAI, June 13 — Chinese regulators should step up support for the economy and keep ample liquidity in the financial system, Vice Premier Liu He said today, suggesting Beijing would soon unveil more policies to bolster growth amid rising US…


MBSB keeping tabs on expected credit losses

KUALA LUMPUR: Malaysia Building Society Bhd (MBSB) is monitoring its expected credit losses (ECL) and managing its impairments more aggressively to negate any effects to its financial performance for the full year ending Dec 31, 2019 (FY19).

MBSB’s net profit had fallen 73.5% to RM83.83 million for the first quarter ended March 31, 2019 against RM316.79 million in the previous corresponding period, dragged down by higher ECL. The increase in ECL was due to writeback recorded in Q118 as a result of staging improvement from stage 2 to stage 1 impairment.

President and CEO Datuk Seri Ahmad Zaini Othman said it is difficult to tell whether there will be higher ECL for FY19. He said technically the ECL should not be higher, but noted that it is about how the bank manages and collect its credit.

“As long as we’re able to retain and manage the ECL, we should be able to neutralise it. The existing ECL is something that we’re consistently monitoring and doing the full recovery,” he told reporters after its AGM today.

He said there will still be certain percentage of impairments from personal financing and the retail segment, but emphasised that it needs to observe and manage the corporate impairments well.

“So far things are looking okay, we’re managing that well. Existing impairment is all about collection. We’re going on an aggressive approach towards collection. We’ve got a new collection system, putting in more workforce towards recovery of early care accounts – one to two months kind of accounts. That hopefully would manage our impairments moving forward,” explained Zaini.

He also pointed out that the Malaysian Financial Reporting Standards 9 requires the bank to provide for late payment of even one or two days, which is a challenge for the entire industry.

Meanwhile, MBSB expects to have fully syariah-compliant securities on Bursa Malaysia within two years, with MBSB Bank Bhd eventually being the holding company.

Zaini said over 85% of its conventional assets have been converted into Islamic assets with about 12% remaining to be done.

“It opens up more opportunities for us. (Having) Syariah-compliant stocks is easier to attract more investments.”

In April 2018, MBSB became a full fledged Islamic bank after it acquired Asian Finance Bank.

Zaini said MBSB is looking at new streams of business, including trade finance, treasury, wealth management products and services, as well as alternative financial services like peer-to-peer lending.

“We started doing trade finance and we’ve got facilities of about RM500 million in just a few months. We’re putting in place the new trade finance platform and new talent,” he added.

Meanwhile, MBSB is aiming for a loan growth of 5% this year, from 3% last year, helped by the new revenue stream.

On the recent overnight policy rate cut, he said this will benefit the bank as 63% of its portfolio are fixed rates.


Banking sector’s net interest margin to face further pressure

PETALING JAYA: The banking sector, which reported subdued earnings in the first quarter (Q1 19) of the year, is expected to face headwinds in terms of net interest margin (NIM) moving forward, said analysts.

According to AllianceDBS Research, the overnight policy rate (OPR) hike in January 2018 led towards deposit competition and repricing, which translated into thinning NIMs up till Q1 19.

“NIMs are expected to face additional pressure from the OPR cut in May, on top of deposit competition that has not abated meaningfully yet. That said, some banks like Maybank and Hong Leong Bank have guided for minimal impact from the OPR cut at 1-2bps,” it said in its report.

The research house said that industry loans growth would need more time to ramp up, noting the slow 2% year-to-date loans growth in April.

“We have assumed 5% growth in 2019. Barring a meltdown in market sentiment, non-interest trends should see some improvement as capital market activity picks up beginning in Q2 19. Credit costs should normalise from a lower level in 2018,” it said.

AllianceDBS trimmed its FY19-20 sector earnings by circa 1% after accounting for some additional NIM compression arising from the OPR cut and lower non-interest income trends, specifically at AMMB and Hong Leong Bank.

Its large cap top pick is RHB Bank due to compelling valuations and steadily improving earnings trajectory while its small cap top pick is BIMB Holdings for its resilient earnings profile on the back of strong franchise in personal financing, supported by contributions from insurance business.

Hong Leong Investment Bank (HLIB) Research said the average lending rate decreased 1bp versus a 1bp rise in the three-month board fixed deposit, hence the interest spread has narrowed 2bps to 1.86%.

“Overall, we still see challenging NIM outlook on a sequential basis given the recent OPR cut and diminishing flexibility to optimise loan-to-deposit ratio (LDR). Also, banks are now stuck with higher cost of funds, as a result from the prior retail fixed deposit competition cycle,” it said.

HLIB noted that LDR in April stood at 87%, with the highest being 89% in February last year. With LDR near its 10-year high, it expects deposits competition to persist, but with less intensity compared with two to three quarters ago as banks strive to avoid excessive negative carry.

It maintained its 4.5-5% loans growth for the year, as repayment rates are seen normalising downwards in the upcoming months and as economic activities regain momentum. It also maintained its “neutral” call on the sector.

Meanwhile, CGS-CIMB expects a recovery in loan growth in the near term, despite the marginal growth in the industry’s loan base of 0.5% in the first four months of the year, which translates into an annualised rate of 1.5%.


Trade tensions weigh on banking sector profitability, says S&P

PETALING JAYA: Major Malaysian banks’ performance for the first quarter of the year point towards a weakening trend in profitability amid escalating trade tensions, according to S&P Global Ratings.

“We believe banks operating in the local Malaysian market will see visible margin compression, accompanied by slower loan growth and higher non-interest income volatility for the rest of 2019,” it said in a press release today.

However, asset quality will likely hold, despite downward pressure.

The credit risk research firm indicates that all five Malaysian banking groups under its coverage reported a year-on-year (y-o-y) margin decline for 1Q FY19, ranging from nine basis points (bps) by Maybank and CIMB to 26bps for AmBank.

It also reported that three out of the five banks have shown quarterly margin deterioration on a sequential basis of 8bps for Maybank, 4bps for RHB and 10bps for AmBank.

On the other hand, the remaining two saw modest improvement of 1bps for Public Bank and 3bps for CIMB. However, these improvements are either unsustainable or masked by their overseas operations’ net interest margin recovery, in the case of Indonesia for CIMB.

“All these factors contribute to our negative view on Malaysian banks’ profitability trend this year, especially when we believe there is limited room for further cost cutting,” said S&P’s credit analyst Nancy Duan.

She said that a big chunk of investments made by banks nowadays are more structural and strategic, such as technological investments, which should not be called off easily.

“All in all, we are likely to see a disappointing 2019 in terms of bottomline earnings,” she added.

On the bright side, the firm did note that it continues to see resilience in Malaysian banks’ asset quality profile at this uncertain time, despite downward pressure.

“We are of the opinion that the banks’ domestic portfolio will remain sound in general, supported by healthy private consumption and the revival of previously suspended infrastructure projects,” said the firm.

It pointed out that small and midsize enterprises as well as low-income households are more vulnerable in a slowing economy, but the lower interest rates could help cushion the impact.


Alliance Bank’s Q4 profit flat, to pay 8.2 sen dividend

PETALING JAYA: Alliance Bank Bhd posted a flat net profit RM111. 77 million for the fourth quarter ended March 31, 2019 against RM112.87 million in the previous corresponding period.

Its revenue also remained stable at RM403.44 million against RM403.53 million previously.

It has proposed a second interim dividend of 8.2 sen per share for the quarter under review.

Alliance Bank’s full-year net profit grew 9% to RM537.59 million from RM493.23 million reported in the previous year, with revenue rising 3.2% to RM1.62 billion from RM1.57 billion.

On the whole, the group attributed its financial performance to the 8.9% growth for its net interest income, driven by stronger loans growth and improved loan mix from better risk adjusted return loans.

Alliance Bank’s total loans grew 6% to RM42.7 billion, outpacing the industry loan growth rate of 4.9%. Its net interest margin (NIM) gained 10 basis points to 2.5%, mainly due to the positive impact of the overnight policy rate hike in January 2018 and improved margins from better risk adjusted return loans.

Its NIM is expected to stabilise around 2.4% in FY2020.


Alliance Bank records 9pc jump in FY19 earnings

KUALA LUMPUR, May 29 — Alliance Bank Malaysia Bhd lifted its net profit by 9 per cent to RM537.60 million in the financial year ended March 31, 2019 (FY19) largely due to the better performance of its business banking business. In a filing with…


CIMB posts lower net profit of RM1.19b in Q1

KUALA LUMPUR, May 29 ― CIMB Group Holdings Bhd's posted a lower net profit of RM1.19 billion in the first quarter which ended March 31, 2019 (1Q 2019) compared to RM1.31 billion in the same period last year. Revenue also fell to RM4.17 billion…