Sector earnings grew at a slower pace due to higher MFRS9 provisions.
The pre-tax profits of commercial banks in Malaysia inched up 1.5% to $9.04b (RM36.82b) in 2018 from $8.67b (RM35.32b) in the previous year as banks set aside higher provisions under impairment rules for the implementation of MFRS 9, according to central bank data.
Also read: Malaysian bank loan growth up 5.6% in 2018
As a result, capital ratios fell in 2018 compared to the previous two years and annual return on assets and equity also slowed down although Bank Negara Malaysia waved off concerns.
“The impact from provisions was, however, cushioned by the regulatory reserves which banks have been required to maintain since 2010. Financing margin (net of impairment provisions and operating costs) edged marginally higher, with a majority of banks reporting lower costs of operations,” the central bank said.
Interest income rose 8.8% YoY to $27.60b (RM112.47b) in 2018 from $25.15b (RM102.49b) in the previous year. Islamic banking pre-tax profit similarly rose by 12.88% to $1.88b (RM7.67b) over the same period.
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