KUALA LUMPUR (Aug 25): Malayan Banking Bhd (Maybank)’s nearly 60% increase in allowances for impairment losses on loans in the second quarter could just be a one-off event, said its newly appointed group president and chief executive officer Datuk Khairussaleh Ramli.
Khairussaleh explained that the spike in loan loss provision is a pre-emptive measure in anticipation of weaker external environment outlook in the second half of the year.
“This is a pre-emptive provision, and it is supposed to be one-off, particularly affecting segments of oil and gas as well as hospitality,” said Khairussaleh in his first media briefing on quarterly results since his return to Maybank in May.
Khairussaleh took over the helm from Datuk Seri Abdul Farid Alias.
The banking group’s allowances for impairment losses on loans swelled to RM837.55 million for second quarter ended June 30, 2022 (2QFY22), a 59.6% year-on-year surge, bringing the amount for the first half period (1HFY22) to RM1.28 billion, about 6.6% lower than RM1.37 billion in previous corresponding period.
The increase in impairment losses on loans was higher than analysts’ expectations as most generally held the view that Maybank already made sufficient provision in the past.
In addition, allowances for impairment losses on financial investments ballooned over seven times to RM320.87 million for 2QFY22, from RM43.99 million a year ago, while 1HFY22 provisions for these financial assets were over three times higher at RM448.46 million, up from RM126.26 million in 1HFY21.
The high provision had weighed on Maybank’s 2QFY22 net profit, which fell by 5.4% on-year to RM1.86 billion from RM1.96 billion a year ago, despite 17% growth to net interest income to RM3.52 billion from RM3.02 billion.
Khairussaleh said Maybank, the country’s largest bank by asset size, kept a prudent stance on asset quality as a pre-emptive measure for vulnerable segments as global outlook was weighed by factors like sanctions by Europe against Russia, China’s Covid-19 lockdown and inflation in the US.
“Things are looking quite challenging. Having said that, from our point of view, we are still trying to look at how we can grow responsibly, and making sure that asset quality is maintained.
“We are still out there to do business, we believe a lot of companies are trying to come out of the pandemic, generate business activities, and we are there to support them. Hence, we will do our job in supporting economic growth,” he said.
In 1HFY22, net profit declined 10% to RM3.9 billion from RM4.35 billion in the previous corresponding period, while net interest income grew 16% to RM6.85 billion from RM5.93 billion.
During the briefing on Thursday, Khairussaleh also said the group is not moving its headquarters (HQ) to the upcoming Merdeka 118 project, which is owned by its largest shareholder Permodalan Nasional Bhd (PNB). PNB holds a 41% stake in Maybank.
“We will stay in Menara Maybank,” he said briefly when asked to comment on whether the group will move its HQ.