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Friday, November 25, 2016

Maybank's 3Q profit falls, lowers loan growth outlook

By Reuters / Reuters | November 24, 2016 : 4:07 PM MYT

KUALA LUMPUR (Nov 24): Malaysia's biggest lender Malayan Banking Bhd (Maybank) said on Thursday it had cut its loan growth projection for the current financial year, after posting a drop in third-quarter profit hurt by a higher tax charge.

Net profit for July-September was RM1.795 billion (US$402.9 million), 5.4% lower than RM1.898 billion a year earlier.

The lender's fourth straight quarterly drop in profit comes amid slowing loan growth at home and exposure to the oil and gas industry that has been hit by falling prices.

The group lowered the full-year estimate for loan growth to 2–3% and cut the forecast for return on equity to 10.5–11% due to "selective asset growth".

"We are mindful of potential asset quality weakness in a slowing economic growth environment in some of our key operating markets," Maybank said in a statement.

"As the group has proactively restructured and rescheduled borrowers' facilities in 1H FY2016, the group continues to monitor the impaired status of these loans with the intention of recognising some recoveries in 2H FY2016," the bank said.

It added that it seeks to maintain strong capital levels, well above regulatory requirements.

Chairman Tan Sri Megat Zaharuddin Megat Mohd Nor said in a statement that the lender continues to seek ways to raise revenues and reduce loan loss provisions.

"We also remain well positioned in financing the infrastructure needs in the various ASEAN countries, whilst stimulating growth in the SME sector given lowering interest rates," he said.

Maybank's net interest income for the quarter declined 2.4% to RM2.83 billion. Quarterly revenue also slipped to RM11.29 billion from RM11.38 billion.

Analysts polled by Reuters had estimated net income of RM1.08 billion and revenue of RM5.42 billion for the quarter.

AmResearch said in a research note last week it maintains a "hold" recommendation on Maybank. A key catalyst for the re-rating of the bank would be improvements in provisions and upgrades in the classification of the earlier restructured and rescheduled loans to performing status, the research house said.

S&P Global Ratings recently affirmed a stable rating outlook on Maybank, believing it would continue to have a strong market position, good capital base, and an ample funding and liquidity position for at least the next 18 to 24 months.

"Maybank has a solid capital buffer, an earnings capacity that is better than the peer group average, and a diversified loan portfolio. These strengths should help to absorb rising credit risks, given slower regional growth and the bank's exposure to some cyclical sectors that may undermine asset quality," the credit risk research firm said.

Maybank's share price has fallen more than 8% so far this year.

(US$1 = RM4.4550)

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