Malaysian banks' core net profit fell 2% in Q1

AMMB’s net profit crashed 36%.

Malaysian banks opened the year on poor financial footing as the sector's core net profit sank into the negative territory for the first time since Q2 2016 after falling 2%, according to a report by Maybank Kim Eng. The sector's cumulative operating profit also shrunk for the third consecutive quarter by 4%.

“The common thread amongst most banks in Q1 2019 was slower loan growth, net interest margin (NIM) compression and a YoY contraction in non-interest income (NOII). NIM compression was particularly severe, declining 10bps on average YoY,” Maybank KE analyst Desmond Ching said in a report.

AMMB emerged as the season’s worst performer as its core operating profit crashed 24%, with margins contracting 11bps YoY and NOII dropped 11%. Meanwhile, the bank’s net profit plummeted 36% YoY in Q1. On the other hand, the best performer was RHB whose net profit grew 7% YoY on the back of lower provisions.

Loan growth for Maybank, CIMB, Public Bank, AMMB, Hong Leong Bank, RHB, and Alliance Bank grew 5.6% YoY in Q1 but hit only 0.8% QoQ, implying annualised loan growth of just 3.2%. Domestic gross loan growth hit 5.1% YoY for the same period.