KUALA LUMPUR (Dec 3): Maybank IB Research has maintained its “neutral” rating on the Malaysian banking sector and has lowered its core net profit growth forecasts to 2% (from 5%) for 2014 and 8% (from 9%) for 2015.

In a note Wednesday, the research house said 3Q14 saw the results of most banks coming in within expectations but there were disappointments from the two largest banks – Malayan Banking Bhd and CIMB Group Holdings Bhd - as well as Hong Leong Financial Group Bhd (HLFG).

The research house said that positively, net interest margin (NIM) held up quarter-on-quarter (q-o-q) in 3Q14, aided by the OPR hike while provisions were lower year-on-year (y-o-y).

Maybank IB Research said this was, however, offset by lower non-interest income (NOI) and as a result, 3Q14 core net profit declined 2% y-o-y for its basket of stocks.

It said 9M14 core net profit rose a marginal 2% y-o-y.

“This results season, we upgraded Public Bank to Hold from Sell and downgraded HLFG to Hold from Buy, after having outperformed its peers,” it said.

Maybank IB Research said sector earnings growth had continued to see downward pressure and it had since cut its estimates.

“We now expect operating income to expand by just 1% in 2014 and 10% in 2015, while net profit growth is projected at 2% in 2014, 8% in 2015.

“The faster growth in 2015 builds on the assumption of ongoing NIM compression (but to a lesser degree compared to 2014), and for credit costs to normalise higher, offset by higher NOII and improved cost efficiencies,” it said.

Maybank IB Research said downside risks to 2015 earnings include (i) greater-than-expected NIM pressure from stiff competition for funds and (ii) more significant asset quality issues.

It said Malaysian banks continued on a capital preservation mode with average ROEs expected to decline to 13.2% in 2015 from 13.9% in 2014 (15.1% in 2013).

At 11.08am, Maybank fell 2.06% or 19 sen to RM9.02, CIMB down 1.38% or 8 sen to RM5.72, HLFG shed 0.48% or 8 sen to RM16.72, Public Bank Bhd was down 0.44% to RM18.24, and RHB Capital Bhd down 2.47% or 20 sen to RM7.90.