PETALING JAYA: Malayan Banking Bhd (Maybank), which posted a lower year-on-year (y-o-y) net profit of RM6.48 billion in FY20, remains cautious on potential asset quality slippages given uncertainty over the economic recovery trajectory for the Malaysian and Indonesian markets.
“Both markets account for collectively 80% of the group’s income and have seen a rough start in 2021 with more restrictions imposed in Q1’21 owing to rising Covid-19 cases,” Maybank group president & CEO Datuk Abdul Farid Alias told a virtual press conference on Thursday after announcing its FY20 financial results.
He provided a group return in equity (ROE) guidance of 9% in FY21, compared with 8.1% in FY20, on continued soft income environment and elevated provisioning. Net credit charge off is expected to remain elevated albeit slightly lower y-o-y at potentially 70-80bps for FY21, from 88bps in FY20.
In FY20, loan loss provisioning doubled year-on-year to RM4.6 billion, with close to 50% of provisioning attributed to macroeconomic variable adjustments and management overlay for vulnerable borrowers. Loan loss coverage increased to 106.3% as at end-December 2020 from 77.3% a year earlier as a result of the higher provisioning undertaken during the year, as new impaired loan formation remained moderate with group gross impaired loan ratio at 2.23% as at end December 2020.
As at February 2021, the percentage of loans under repayment assistance, relief and rescheduling & restructuring programmes against respective total home market loans are 9.7% (Malaysia), 20.8% (Indonesia) and 6.2% (Singapore). The percentage of outstanding loan balance as at Feb 11, 2021 are 15.7% (Malaysia), 20.8% (Indonesia) and 6.2% (Singapore).
For the fourth quarter ended Dec 31, 2020 (Q4’20), Maybank’s net profit fell 37.2% to RM1.54 billion compared with RM2.45 billion a year earlier due to significantly higher net impairment losses of RM1.5 billion from RM298.9 million a year earlier. The group saw net operating income ease by 2.8% to RM6.31 billion from RM6.49 billion in Q4’19 as a 0.1% increase in net fee-based income was unable to offset the 4% decline in net fund based income.
It closed FY20 with a net profit of RM6.48 billion, 20.9% lower compared with RM8.2 billion a year earlier as the group had to book in significantly higher net impairment losses owing to the continued impact from the Covid-19 pandemic. Net impairment losses rose to RM5.07 billion in FY20 compared with RM2.32 billion a year ago, which impacted overall net earnings for the year.
Despite the challenging year, the group recorded a stable net operating income which came in 0.1% higher at RM24.76 billion from a year earlier, attributable to a 12.3% y-o-y increase in total net fee based income.
The group’s Malaysian operations registered a steady 4% expansion in gross loans for FY20, while Singapore and Indonesia saw declines of 1.9% and 14.8% respectively, mainly as a result of write-offs and repayments. Consequently, group gross loans for 2020 came in relatively flat compared with a year ago.
“We expect a pick up in loan growth. We’re hopeful of a better growth this year,“ said Farid.
Net interest margin (NIM) for FY20 came in 17bps lower at 2.10%, compared with 2.27% in FY19, well within the FY20 guidance of 20bps compression.
Group NIM is expected to remain flat y-o-y and should improve as deposits fully re-price, barring further OPR cuts, said Farid.
The board of directors has proposed a final single-tier dividend of 38.5 sen per share, comprising an electable portion of 21 sen per share under its Dividend Reinvestment Plan. Together with the interim dividend of 13.5 sen per share, the full-year dividend amounts to 52 sen per share, and translates into a full year dividend payout ratio of 91.2%. Maybank is maintaining its 40-60% dividend payout policy rate to reward shareholders, while maintaining capital resiliency.
Maybank remains cautious on potential asset quality slippages. – REUTERSPIX
Source: The Sun Daily
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