loan-to-deposit ratio

 
 

CIMB Thai’s FY18 net profit drops on higher tax expenses

PETALING JAYA: CIMB Thai Bank PCL’s unaudited con-solidated net profit for the year ended Dec 31, 2018 (FY18) fell 98.2% year on year to 6.9 million baht (RM883,732), dragged down mainly by higher income tax expenses.

Profit before tax decreased 44.5% to 271.2 million baht year on year, mainly due to a 9.6% increase in operating expenses and lower net fee and service income and other income of 7.0% and 2.6% respectively. This was offset by a 5.3% growth in net interest income and a 2.6% decline in provisions.

President and CEO Kittiphun Anutarasoti said CIMB Thai group’s consolidated operating income, on a year-on-year basis, increased 2.9% from 2017 to 13.54 billion baht from higher net interest income of 5.3% on the back of loan expansion and higher interest income on investments.

Net interest margin over earning assets stood at 3.71% in 2018, compared with 3.89% in 2017 as a result of lower yield on earning asset.

As at Dec 31, 2018, CIMB Thai’s total gross loans stood at 227.8 billion baht, making an increase of 6.9% from Dec 31, 2017.

Deposits stood at 234.3 billion baht, an increase of 6.5% from at the end of December 2017. CIMB Thai said the modified loan-to-deposit ratio was higher at 97.2% against 96.8% as at Dec 31, 2017.

The gross non-performing loan (NPL) stood at 9.9 billion baht, with a lower gross NPL ratio of 4.3% compared with 4.8% as at Dec 31, 2017. The lower NPL ratio was due to more efficient risk management policies, improved asset quality management and loan collection processes as well as the sale of some NPLs in 2018.


CIMB Thai FY18’s net profit slips to THB6.9m on higher expenses

PETALING JAYA: CIMB Thai Bank PCL’s unaudited consolidated net profit for the year ended Dec 31, 2018 (FY18) fell 98.2% year-on-year (YoY) to THB6.9 million (RM883,732), mainly dragged by higher income tax expenses.

Profit before tax (PBT) decreased 44.5% YoY to THB271.2 million, mainly due to a 9.6% increase in operating expenses and lower net fee and service income and other income of 7.0% and 2.6% respectively.

This was offset by a 5.3% growth in net interest income and a 2.6% decline in provisions.

President and CEO Kittiphun Anutarasoti said on a YoY basis, CIMB Thai group’s consolidated operating income increased 2.9% from 2017 to THB13.54 billion from higher net interest income of 5.3% on the back of loan expansion and higher interest income on investments.

Net interest margin over earning assets stood at 3.71% in 2018, compared with 3.89% in 2017 as a result of lower yield on earning asset.

As at Dec 31, 2018, CIMB Thai’s total gross loans stood at THB227.8 billion, making an increase of 6.9% from Dec 31, 2017.

Deposits stood at THB234.3 billion, an increase of 6.5% from at the end of December 2017.

CIMB Thai said the modified loan-to-deposit ratio was higher at 97.2% against 96.8% as at Dec 31, 2017. The gross non-performing loan (NPL) stood at THB9.9 billion, with a lower gross NPL ratio of 4.3% compared with 4.8% as at Dec 31, 2017.

The lower NPL ratio was due to more efficient risk management policies, improved asset quality management and loan collection processes as well as the sale of some NPLs in 2018.

“CIMB Thai group’s loan loss coverage ratio increased to 107.0% as at Dec 31, 2018 from

93.2% at the end of December 2017. As at Dec 31, 2018, our total provisions stood at THB10.5 billion, showing an excess of THB5.0 billion over Bank of Thailand’s reserve requirements.”


CIMB Thai FY18’s net profit plunges 98.2% on higher expenses

PETALING JAYA: CIMB Thai Bank PCL’s unaudited consolidated net profit for the year ended Dec 31, 2018 (FY18) fell 98.2% year-on-year (YoY) to THB6.9 million (RM883,732), mainly dragged by higher income tax expenses.

Profit before tax (PBT) decreased 44.5% YoY to THB271.2 million, mainly due to a 9.6% increase in operating expenses and lower net fee and service income and other income of 7.0% and 2.6% respectively.

This was offset by a 5.3% growth in net interest income and a 2.6% decline in provisions.

President and CEO Kittiphun Anutarasoti said on a YoY basis, CIMB Thai group’s consolidated operating income increased 2.9% from 2017 to THB13.54 billion from higher net interest income of 5.3% on the back of loan expansion and higher interest income on investments.

Net interest margin over earning assets stood at 3.71% in 2018, compared with 3.89% in 2017 as a result of lower yield on earning asset.

As at Dec 31, 2018, CIMB Thai’s total gross loans stood at THB227.8 billion, making an increase of 6.9% from Dec 31, 2017.

Deposits stood at THB234.3 billion, an increase of 6.5% from at the end of December 2017.

CIMB Thai said the modified loan-to-deposit ratio was higher at 97.2% against 96.8% as at Dec 31, 2017. The gross non-performing loan (NPL) stood at THB9.9 billion, with a lower gross NPL ratio of 4.3% compared with 4.8% as at Dec 31, 2017.

The lower NPL ratio was due to more efficient risk management policies, improved asset quality management and loan collection processes as well as the sale of some NPLs in 2018.

“CIMB Thai group’s loan loss coverage ratio increased to 107.0% as at Dec 31, 2018 from

93.2% at the end of December 2017. As at Dec 31, 2018, our total provisions stood at THB10.5 billion, showing an excess of THB5.0 billion over Bank of Thailand’s reserve requirements.”


Outlook for local banking sector remains challenging: Kenanga Research

PETALING JAYA: The banking sector’s outlook is challenging due to external concerns while clarity and direction on the domestic front remain murky, according to Kenanga Research, which maintained a neutral stance for the sector as no fundamental change is expected, and the sector lacks concrete catalysts.

“We view the industry with caution as uncertainties and headwinds still prevail. The industry remains unexciting, dragged by moderate loan growth and soft capital markets. Prevailing negative sentiment both globally and domestically will continue to drive volatility and uncertainty in the industry. Caution will still prevail due to the soft economy outlook globally,“ the research house said in a note today.

It said banks with healthy asset quality (hence low impairment allowances) will still be the favour due to their defensive quality.

“As such, selective asset growth will still be the focus for the banks. Despite stable economic outlook in the domestic environment coupled with low unemployment, we opine that cautiousness and selective assets growth will still prevail in the industry,“ Kenanga Research explained.

It said loan growth moving forward will still be moderate as uncertainties prevail with fee-based income expected to be soft as a result of the volatile capital market. However, with the stable outlook, this will support a moderate and stable credit charge for the industry.

“We expect impairment allowances (credit costs) to be stable and consistent (as it had been generally in 2018) which will lend support to the banks’ bottom line. We do not discount another potential up-cycle of impairment allowances, especially those highly exposed to the energy sector (CIMB, Maybank and RHB Bank) as energy prices have been under pressure due to the perceived economic slowdown both domestically and globally.”

Kenanga Research expects mild compression for net interest margin (NIM) as most of the banks’ loan-to-deposit ratio and loan-to-fund ratio are over 90% and 80%, respectively, as compression will be mitigated by soft credit demand. The deferment of NSFR (net stable funding ratio) into 2020 plus the absence of high credit demand will support the outlook for a stable to mild compression in NIM.

“However, looking at the slowing momentum in household demand, we do not discount the likelihood of competitive lending rates in the short term as banks strive to achieve their loan growth target. This competition will ultimately lead to further downside pressure on NIM.”

The research house has revised downwards the 2018/2019 earnings estimates by 80bps/30bps to +6.7%/+5.6% respectively.

“For 2019, earnings are slower at +5.6% year-on-year (yoy) as we based from these assumptions of credit charge at 0.33%; and slight compression on NIM by 3bps and a higher pace from fee-based income (+6.6% yoy due to a lower base).”

It also toned its outlook on loan growth for FY18 at +4.7% (from +4.9% previously) on account of revision of prevailing headwinds.

Kenanga Research reiterated its outperform call for BIMB Holdings Bhd, as its financing portfolio (70% of total financing) is skewed towards household (75% first-time buyers for residential property) with focus on growing its personal financing will minimise NIM compression.

Another preferred pick is Malaysia Building Society Bhd (MBSB), which is expected to achieve 3-4% growth driven by corporate loans/financing as another RM950 million is expected to be disbursed in Q4 18.


(eanbank) Outlook remains challenging for banking sector

PETALING JAYA: The banking sector’s outlook is challenging due to external concerns while clarity and direction on the domestic front remain murky, according to Kenanga Research, which maintained a neutral stance for the sector as no fundamental change is expected and that the sector lacks concrete catalysts.

“We view the industry with caution as uncertainties and headwinds still prevail. The industry remains unexciting, dragged by moderate loans growth and soft capital markets. Prevailing negative sentiment both globally and domestically will continue to drive volatility and uncertainty in the industry. Caution will still prevail due to the soft economy outlook globally,“ the research house said in a note yesterday.

It said banks with healthy asset quality (hence low impairment allowances) will still be the favour due to their defensive quality.

“As such, selective asset growth will still be the focus for the banks. Despite a stable economic outlook in the domestic environment coupled with low unemployment, we opined that cautiousness and selective assets growth will still prevail in the industry,“ Kenanga explained.

It said loans growth moving forward will still be moderate as uncertainties prevail with fee-based income expected to be soft as a result of the volatile capital market. However, with the stable outlook, this will support a moderate and stable credit charge for the industry.

“We expect impairment allowances (credit costs) to be stable and consistent (as it had been generally in 2018) which will lend support to the banks’ bottom line. We do not discount another potential up-cycle of impairment allowances, especially those highly exposed to the energy sector (CIMB, Maybank and RHB Bank) as energy prices have been under pressure due to the perceived economic slowdown both domestically and globally.”

Kenanga Research also expects mild compression for net interest margin (NIM) as most of the banks’ loan-to-deposit ratio (LDR) and loan-to-fund ratio (LTF) are over 90% and 80%, respectively, as compression will be mitigated by soft credit demand. The deferment of NSFR (net stable funding ratio) into 2020 plus the absence of high credit demand will support the outlook for a stable to mild compression in NIM.

“However, looking at the slowing momentum in household demand, we do not discount the likelihood of competitive lending rates in the short-term ahead as banks strive to achieve their loans growth target. This competition will ultimately lead to further downside pressure on NIM.”

The research house has revised downward the 2018/2019 earnings estimates by 80bps/30bps to +6.7%/+5.6% respectively.

“For 2019, earnings are slower at +5.6% year-on-year (yoy) as we based from these assumptions of credit charge at 0.33%; and slight compression on NIM by 3bps and a higher pace from fee-based income (+6.6% yoy due to a lower base).”

It also toned its outlook on loans growth for FY18 at +4.7% (from +4.9% previously) on account of revision of prevailing headwinds.

Kenanga Research reiterated its outperform call for BIMB Holdings Bhd, as its financing portfolio (70% of total financing) is skewed towards household (75% first-time buyers for residential property) with focus on growing its personal financing will minimise NIM compression.

Another preferred pick is Malaysia Building Society Bhd (MBSB), which is expected to achieve 3-4% growth driven by corporate loans/financing as another RM950 million is expected to be disbursed in Q4 18.


Cautious on banking sector

PETALING JAYA: The banking sector’s outlook is challenging due to external concerns while clarity and direction on the domestic front remain murky, according to Kenanga Research, which maintained a neutral stance for the sector as no fundamental change is expected and that the sector lacks concrete catalysts.

“We view the industry with caution as uncertainties and headwinds still prevail. The industry remains unexciting, dragged by moderate loans growth and soft capital markets. Prevailing negative sentiment both globally and domestically will continue to drive volatility and uncertainty in the industry. Caution will still prevail due to the soft economy outlook globally,“ the research house said in a note yesterday.

It said banks with healthy asset quality (hence low impairment allowances) will still be the favour due to their defensive quality.

“As such, selective asset growth will still be the focus for the banks. Despite a stable economic outlook in the domestic environment coupled with low unemployment, we opined that cautiousness and selective assets growth will still prevail in the industry,“ Kenanga explained.

It said loans growth moving forward will still be moderate (as uncertainties prevail) with fee-based income expected to be soft with the volatile capital market. However, with the stable outlook, this will support a moderate and stable credit charge for the industry.

“We expect impairment allowances (credit costs) to be stable and consistent (as it had been generally in 2018) which will lend support to the banks’ bottom-lines. We do not discount another potential up-cycle of impairment allowances, especially those highly exposed to the energy sector (CIMB, Maybank and RHB Bank) as energy prices have been under pressure due to the perceived economic slowdown both domestically and globally.”

It also expects mild compression for net interest margin (NIM) as most of the banks loan-to-deposit ratio (LDR) and loan-to-fund ratio (LTF) are over 90% and 80%, respectively, as compression will be mitigated by soft credit demand. The deferment of NSFR into 2020 plus the absence of high credit demand will support the outlook for a stable to mild compression in NIM.

“However, looking at the slowing momentum in household demand, we do not discount the likelihood of competitive lending rates in the short term ahead as banks strive to achieve their loans growth target. This competition will ultimately lead to further downside pressure on NIM.”

Its 2018/2019 earnings estimates are revised downwards, 80bps/30bps to +6.7%/+5.6% respectively. 2018 will be driven by lower credit charge at 0.35% (from 0.46% previously), NIM at 2.2% (down by 5bps) due to the absence of additional rate hike and pausing of deposits intake (due to strategic reasons) and deferment of NSFR9; as well as lower fee-based income at +1.4% (from +3.5% previously) to take into account positive of soft and volatile capital market activities in Q2 and Q3.

The research house toned its outlook on loans growth for FY18 at +4.7% (from +4.9% previously) on account of revision of prevailing headwinds.

“For 2019, earnings are slower at +5.6% year-on-year (yoy) as we based from these assumptions of credit charge at 0.33%; and slight compression on NIM by 3bps and a higher pace from fee-based income (+6.6% yoy due to a lower base).”

It reiterated its outperform call for BIMB Holdings Bhd, as its financing portfolio (70% of total financing) is skewed towards household (75% first-time buyers for residential property) with focus on growing its personal financing will minimise NIM compression.

Kenanga said another preferred pick is Malaysia Building Society Bhd (MBSB) and maintained that its 3-4% growth for FY18 is achievable driven by corporate loans/financing as another RM950 million is expected to be disbursed in 4Q18.


Maybank Q2 earnings up 18%, declares 25 sen dividend

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PETALING JAYA: Malayan Banking Bhd's (Maybank) net profit for the second quarter ended June 30, 2018 rose 18.1% to RM1.96 billion from RM1.66 billion a year ago on higher net operating income and lower impairments.

Revenue jumped 5.4% to RM11.51 billion from RM10.92 billion.

The group has proposed to declare an interim dividend of 25 sen for the quarter under review.

For the six-month period, Maybank's net profit increased 13.9% to RM3.83 billion from RM3.36 billion a year ago on the back of higher operating income, lower impairments as well as reduced overheads as a result of better cost management. Revenue went up 3.7% to RM23.02 billion from RM22.20 billion.

Despite the challenging global economic environment, operating income for the first six months rose 3.2% to RM11.67 billion, aided by steady growth in the group’s diversified operations and strong franchise across the region. This lifted pre-provisioning operating profit by 7.3% to RM6.19 billion compared with a year earlier.

Gross deposits, meanwhile, rose 5.5%, boosted by an 11.6% rise in Singapore and a 10.1% increase in Malaysia. The group’s strategy of managing deposit growth in line with, or ahead of, loans growth helped it register an improved loan-to-deposit ratio (LDR) of 92.8% as at June 2018 compared with 93.8% a year earlier.

The group's net interest margin (NIM) dipped 8 basis points to 2.33% in June 2018 from the 2.41% a year earlier.

Maybank maintained a robust capital position with a total capital ratio of 17.78% and common equity tier 1 ratio of 13.16% (after the proposed dividend and assuming an 85% dividend reinvestment rate). Loan loss coverage (including regulatory reserve), meanwhile, stood at 93.6%.

Its first-half net impairment losses declined 22.9% to RM1.06 billion from RM1.38 billion a year earlier.

Maybank chairman Datuk Mohaiyani Shamsudin said Maybank’s performance demonstrates its strength and resilience in facing the evolving environment and the shift in the banking landscape. The group is confident that its strong market position and solid fundamentals will enable it to steer itself through the challenges as it seeks to continue delivering value to stakeholders.

Meanwhile, group president & CEO Datuk Abdul Farid Alias said that notwithstanding the volatility in the current operating environment, the group will continue to ride on the growing economy to strengthen its banking business as well as fulfil its growth strategy.

“The macro environment presented many challenges to the banking business this year where we saw a slight compression in NIM due to our deliberate strategy to be defensive from a liquidity perspective in the first half of the year. We have demonstrated our ability to achieve growth even in the midst of significant geopolitical pressures, and we intend to leverage our strong brand equity, digital capabilities as well as our expertise and solid infrastructure to tap into growth opportunities and serve our customers better.”

At 2.40pm, Maybank's share price was trading at RM9.98, down 2 sen or 0.2% with 2.85 million shares changing hands.


Banks outlook in 2H18: Bright or bleak?

Investors are keen on gauging the overall health of the local financial sector, specifically assessing if the recent shares selloff presents investors with a good buying opportunity. It has been a steady quarter for banks in Malaysia – domestic loan growth in the first quarter of 2018 (1Q18) of most banks was above the industry […]


Moody’s: Outlook for Malaysian banks stable on robust macro conditions, improving capitalization

PETALING JAYA: Moody's Investors Service says that the outlook for the banking system in Malaysia (A3 stable) is stable over the next 12-18 months.

Moody's has maintained a stable outlook on the Malaysian banking system since 2010.

“A key supporting factor of the stable outlook is the robust macroeconomic conditions in and outside Malaysia, which will result in a favorable operating environment for Malaysian banks and help stabilize their asset quality and profitability,” says Moody's Vice President and Senior Analyst Simon Chen.

“At the same time, while we will see faster loan growth, such growth will remain at a pace that is slower than the banks' profit retention, which will lead to stronger capital buffers,” adds Chen.

Moody's conclusions are contained in its just-released report on Malaysian banks titled “Robust macro conditions and improving capitalization support stable outlook”, authored by Chen.

Moody's rates 11 banks in Malaysia: eight conventional commercial banks, one investment bank, one islamic bank and one government-owned development financial institution. The rated commercial banks accounted for some 85% of total loans and deposits in the Malaysian banking system at the end of 2017.

Moody's assessment is based on six drivers: operating environment (stable); asset quality (stable); capital (improving); funding and liquidity (stable); profitability and efficiency (stable); and government support (stable).

On the operating environment, Moody's said that while macroeconomic conditions will prove robust, policy uncertainty poses a risk. Moody's forecasts that Malaysia's real GDP will expand by 5.4% in 2018, and loans will grow 6%-7% in the same period.

The removal of the goods and services tax could boost private consumption and benefit domestic businesses in the near term. However, uncertainty over future policy changes by the new government will weigh on investor and business sentiment over the course of 2018.

With asset quality, Moody's says that the banks' asset quality will stay stable, against the backdrop of easing stress among troubled corporates and slowing growth in household debt levels. New nonperforming loan formation will remain slow amid a moderate rise in interest rates, as corporate profitability improves and growth in risky household loans eases.

As for capitalization, such levels will improve, as capital generation exceeds asset growth, and prove sufficient to cushion one-time adjustments to capital ratios to meet the MFRS 9 standard.

Moody's also opined that the banks' funding and liquidity will stay stable. In particular, the banks' loan-to-deposit ratios will rise as loan growth accelerates, but such ratios will remain below 100%. In addition, the banks will remain well positioned to comfortably meet minimum requirements under Basel III liquidity and funding rules.

On profitability, Moody's says that revenue improvements — driven by faster loan growth — will underpin the banks' profitability profiles. Faster loan growth will boost pre-provision income, although stiffer deposit competition will limit improvements in net interest margins. Credit costs will rise because of the new MFRS 9 standard, but only slightly, because of continuously benign credit conditions.

Government support for the banks in times of stress will continue to prove strong. Recent legislative reforms have not suggested any shift in the government's policy for the resolution of troubled banks outside liquidation, with a lack of legislation to force bank creditors to bear the cost of any bank bailouts.


Moody’s: Outlook for Malaysian banks stable on robust macro conditions, improving capitalisation

PETALING JAYA: Moody's Investors Service says that the outlook for the banking system in Malaysia (A3 stable) is stable over the next 12-18 months.

Moody's has maintained a stable outlook on the Malaysian banking system since 2010.

“A key supporting factor of the stable outlook is the robust macroeconomic conditions in and outside Malaysia, which will result in a favorable operating environment for Malaysian banks and help stabilise their asset quality and profitability,” says Moody's vice-president and senior analyst Simon Chen.

“At the same time, while we will see faster loan growth, such growth will remain at a pace that is slower than the banks' profit retention, which will lead to stronger capital buffers,” adds Chen.

Moody's conclusions are contained in its just-released report on Malaysian banks titled “Robust macro conditions and improving capitalisation support stable outlook”, authored by Chen.

Moody's rates 11 banks in Malaysia: eight conventional commercial banks, one investment bank, one islamic bank and one government-owned development financial institution. The rated commercial banks accounted for some 85% of total loans and deposits in the Malaysian banking system at the end of 2017.

Moody's assessment is based on six drivers: operating environment (stable); asset quality (stable); capital (improving); funding and liquidity (stable); profitability and efficiency (stable); and government support (stable).

On the operating environment, Moody's said that while macroeconomic conditions will prove robust, policy uncertainty poses a risk. Moody's forecasts that Malaysia's real GDP will expand by 5.4% in 2018, and loans will grow 6%-7% in the same period.

The removal of the goods and services tax could boost private consumption and benefit domestic businesses in the near term. However, uncertainty over future policy changes by the new government will weigh on investor and business sentiment over the course of 2018.

With asset quality, Moody's says that the banks' asset quality will stay stable, against the backdrop of easing stress among troubled corporates and slowing growth in household debt levels. New nonperforming loan formation will remain slow amid a moderate rise in interest rates, as corporate profitability improves and growth in risky household loans eases.

As for capitalization, such levels will improve, as capital generation exceeds asset growth, and prove sufficient to cushion one-time adjustments to capital ratios to meet the MFRS 9 standard.

Moody's also opined that the banks' funding and liquidity will stay stable. In particular, the banks' loan-to-deposit ratios will rise as loan growth accelerates, but such ratios will remain below 100%. In addition, the banks will remain well positioned to comfortably meet minimum requirements under Basel III liquidity and funding rules.

On profitability, Moody's says that revenue improvements — driven by faster loan growth — will underpin the banks' profitability profiles. Faster loan growth will boost pre-provision income, although stiffer deposit competition will limit improvements in net interest margins. Credit costs will rise because of the new MFRS 9 standard, but only slightly, because of continuously benign credit conditions.

Government support for the banks in times of stress will continue to prove strong. Recent legislative reforms have not suggested any shift in the government's policy for the resolution of troubled banks outside liquidation, with a lack of legislation to force bank creditors to bear the cost of any bank bailouts.