THE banking sector is expected to remain resilient despite the increased pressure on their net interest margin due to interest rate cuts, an investment bank said.
Kenanga Investment Bank in a research note today (Feb 28) said Maybank posted its best quarter-on-quarter (qoq) performance in the fourth quarter of the financial year 2019 (4QFY19) as card not present transactions (CNP) saw a 22% uptick to RM2.56 bil, underpinned by softer impairment allowance.
“On a year-on-year (yoy) basis, CNP moderated as impairment allowance saw a hike of 44% to RM2.32 bil with operation expenditure 3% higher at RM11.6 bil,” it said.
CNP refers to purchases made by cardholders without physically presenting their credit or debit card at the time of purchase, which often occurs online.
On Maybank’s FY2020 earnings, the investment bank said it has revised downwards its forecast by 5% to RM7.9 bil mainly on account of moderate loans, net interest margin (NIM) pressure, lower economic growth and volatility.
For AMMB Holdings, Kenanga Investment Bank said the bank’s earnings forecast is in line with market expectations supported by strong fund and fee-based income.
“We retain our FY2020 earnings forecast guided by the return of equity (ROE) earnings of RM1.5 bil as results came in in line with our call despite an increased pressure on NIM as another cut is expected,” it said.
Meanwhile, for RHB Bank, the investment bank said the bank recorded a stellar performance as CNP saw an uptick of 8%, driven by the top line revenue of RM7.1 bil and lower impairment allowances.
On RHB’s FY2020 earnings, Kenanga said it revised downwards its estimate by 1% to RM2.5 bil as it would be tough for the bank to achieve the ROE of 10.5% given the uncertainties coming from trade tension and Covid-19 outbreak as well as the possibility of a further rate cut.
The investment bank has maintained its outperform call on both Maybank and AMMB stocks and maintained its neutral stand for RHB Bank.
At the midday break, Maybank was down seven sen to RM8.45 with 5.63 million shares done, AMMB shed six sen to RM3.71 with 1.34 million shares traded and RHB slipped six sen to RM5.55 with 7.75 million transacted. – Feb 28, 2020, Bernama
