KUALA LUMPUR (May 21): Malayan Banking Bhd (Maybank), whose net profit grew 13.3% to RM2.04 billion for the first quarter ended March 31, 2020 (1QFY20), warns of margin squeeze and possible weakness in asset quality after the six-month loan moratorium. 

Maybank announced its quarterly revenue expanded to RM13.22 billion from RM12.97 billion previously. Earnings per share increased to 18.23 sen from 16.37 sen.

The banking group’s quarterly earnings growth hinged on the robust performances in its corporate banking and global markets, investment banking and asset management segments, according to the banking group’s filing to the exchange.

On prospects, Maybank said it will prioritise its capital and liquidity strength, and maintain selective balance sheet expansion coupled with ongoing cost discipline efforts, in view of a softer economic landscape.

Given the low interest rate environment, the country’s biggest lender said its net interest margin is expected to compress.

To comprehend this, Maybank said it will seek to minimise the impact by growing current and savings deposits which carry a lower cost.

The bank also said it anticipates that weakness in its asset quality will be elevated once the moratorium period ends and it will proactively engage with its customers to address potential asset quality weakness.

Given the significant weakening in economic outlook, Maybank said it will need to re-evaluate its headline Key Performance Indicator (KPI) and will provide an update once the impact can be ascertained.

Previously, it has set its headline KPI for return on equity of 10% to 11% in the financial year 2020.

At the noon break, shares in Maybank traded three sen higher at RM7.52, valuing it at a market capitalisation of RM84.53 billion.

Year-to-date, Maybank has fallen almost 13%, trending in line with the share price performance of banking institutions globally.