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Malaysia: Maybank Research sees slower profit growth for banks in 2018
KUALA LUMPUR: Maybank Investment Bank Research forecasts a moderation in operating profit growth of Malaysian banks to 5.4% in 2018 from 9.4% in 2017.
It said on Tuesday the faster domestic loan growth (Maybank Research estimate: 4.5% vs 4.1% in 2017) and prevailing positive JAWS are offset in part by more modest net interest margins (NIM) expansion and non-interest income (NOII) growth.
“Relative to operating profit, we project core net profit to expand at a faster rate of 7.8% YoY, in the absence of bond impairment provisions, mitigated by higher credit costs as a result of MFRS 9 (Malaysian Financial Reporting Standards 9) compliance,” it said.
With common equity Tier 1 (CET1) ratios averaging 12%-13% (Maybank at 14%), capital positions are comfortable to absorb the Day 1 impact of MFRS9.
MFRS 9 is the new accounting standard which came into effect on Jan 1, 2018.
“Generally, we expect most of the banks’ return on equity (ROE) targets to be within reach this year, the exception being CIMB, whereby we are estimating a slightly lower ROE of 10% for 2018 versus management’s target of 10.5%.
“We expect ROEs to expand into 2018, with better ROEs across the board. However, because we expect Public Bank’s ROEs to slip YoY, the aggregate sector ROE is relatively unchanged at 10.4% in 2018 versus 10.3% in 2017,” it said.
Note: The JAWS ratio is a measure used in finance to demonstrate the extent to which a trading entity’s income growth rate exceeds its expenses growth rate, measured as a percentage. – Investopedia
Source: https://www.thestar.com.my/business/business-news/2018/03/06/maybank-research-sees-slower-profit-growth-for-banks-in-2018/#byv73qytTj8up4lq.99