Maybank sees 2.3% fall in 3Q net profit amid Covid-19 pandemic

Maybank sees 2.3% fall in 3Q net profit amid Covid-19 pandemic
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This story has been updated for accuracy.

KUALA LUMPUR (Nov 27): Malayan Banking Bhd (Maybank) saw a slight fall in its net profit for the third quarter ended Sept 30, 2020 (3QFY20) to RM1.95 billion, down 2.3% from RM2 billion for the previous year’s corresponding quarter, amid lower net operating income due to the Covid-19 pandemic.

Revenue for the quarter contracted 0.6% to RM13.76 billion from RM13.83 billion.

The bank declared an interim dividend of 13.5 sen per share, which will be made under its dividend reinvestment plan. 

In a filing with the bourse, Maybank said its group community financial services segment posted a 22% fall in pre-tax profit, mainly due to higher net allowance for impairment losses on loans, advances, financing and other debts of RM229.9 million and lower other operating income of RM117.1 million, although this was mitigated by lower overhead expenses.

Its group investment banking segment, under the global banking business, returned to the black with a pre-tax profit of RM172 million versus a pre-tax loss of RM20.9 million.

It attributed the improvement to a higher other operating income of RM110.9 million, lower overhead expenses, higher net interest income and income from IBS operations, net write-back of impairment losses on loans, advances, financing and other debts, as well as lower net allowance for impairment losses on financial investments and other financial assets.

The group asset management segment saw a decrease in pre-tax profit amid higher overhead expenses, lower net interest income and lower other operating income.

Overall, the global banking business saw an 11% rise in pre-tax profit, contributed by higher net operating income and lower overheads. 

Meanwhile, the group insurance and takaful business saw a 43% increase in pre-tax profit amid higher net earned insurance premiums, lower overhead expenses, higher other operating income and lower net allowance for impairment losses on loans, advances, financing and other debts.

On a quarter-on-quarter (q-o-q) basis, Maybank’s net profit surged 107% from RM941.73 million, while its revenue rose 17% from RM11.79 billion, contributed by higher net interest income and income from its Islamic banking scheme operations and higher net earned insurance premiums.

For the cumulative nine-month period ended Sept 30, 2020 (9MFY20), its net profit fell 14% to RM4.94 billion from RM5.75 billion for the same period a year earlier, while revenue was 2.7% lower at RM38.77 billion versus RM39.86 billion.

On its prospects, the bank noted challenges faced by the global economy amid the Covid-19 pandemic as growth continues to be contingent on effects of the coronavirus.

“Amid expected challenges of the external environment, Maybank group will prioritise its capital and liquidity strength, maintain selective balance sheet expansion in tandem with the group’s risk appetite, and remain focused on our ongoing cost discipline. 

“Given the significant interest rate cuts in 2020 across our key markets, the group’s net interest margin will remain under pressure. However, the group will seek to offset the impact by growing current and savings deposits which carry a lower cost,” said Maybank.

The group remains committed to supporting the domestic economies of its home markets, and said that it will work with affected borrowers to ensure viable solutions are provided to support employment and prevent business failures in the near term.

It will also proactively engage with its customers to address potential asset quality weakness given the softer economic landscape, it said.

“Given the disruptive impact of the Covid-19 pandemic, the group has set its headline KPI (key performance indicator) of a return on equity of about 7.5% for FY20 on the back of lower income due to softer loan growth, net interest margin compression and a day-one modification loss. 

“Also, the group’s loan loss provisioning is expected to remain elevated. The group will mitigate its expected lower income by stepping up its strategic cost management programme to limit the increase in overheads,” it said.

Maybank fell four sen or 0.5% to RM8.15 before the noon market break today, giving it a market capitalisation of RM91.62 billion.

Lam Jian Wyn