CREDITSIGHTS, the market research arm of top three global credit rating agency Fitch Ratings, has retained its market perform recommendations on CIMB Bank (A3(stb)/A-(stb)/NR), RHB Bank (A3(stb)/BBB+(stb)/NR) and Maybank (A3(stb)/A-(stb)/NR).
The banks expect their net interest margins (NIMs) to remain stable at 2Q 2024’s exit level for the rest of the year with Maybank slowing its loan growth and be more margin conscious in its lending during 2H 2024 to support its NIM, according to the research house.
“NIMs improved quarter-on-quarter (qoq) at the Malaysian banks as deposit competition eased with the improving domestic liquidity situation in 1H 2024 and the banks flushed out costlier deposits,” observed CreditSights.in its latest outlook for Malaysian banks.
“Maybank however had a larger NIM compression than its peers (-15 bp yoy vs -5 bp yoy at CIMB and +1 bp yoy at RHB) as well as a downward revision to FY2024 guidance due to insufficient lending discipline amid a high funding cost environment and a focus on volume growth.”
Loan growth for the three banks has also turned to being evenly led across geographies compared to FY2023 where the growth emphasis was on the overseas segments due to the challenged domestic liquidity environment, according to CreditSights.
“Loan growth year-on-year (yoy) was 10.6% at Maybank vs 4.2% at CIMB and 6.4% at RHB,” noted the research house.
“Growth targets this year are relatively more modest (Maybank: 7.5%; CIMB: 5-7%; RHB: >4.5%) as they prioritise margins over volume growth, hence growth in the wholesale/large corporate segment has also been correspondingly middling vs retail and SME/commercial.”
Elsewhere, deposit growth lagged yoy as the banks reduced their liquidity drag on margins while gross loan-deposit ratios (LDR) ticked up ~2 percentage points (ppt) yoy across the board to the 95%-99% range and liquidity coverage ratios (LCR) remain acceptable at ~135-140%.
“Asset quality-wise, headline gross impaired loans (GIL) ratios improved YTD (year-to-date) at Maybank and CIMB while RHB saw a slight uptick,” contended CreditSights.
“1H 2024 credit costs were down yoy to 26 basis points (bp) at Maybank and 33 bp at CIMB while RHB’s increased to 32 bp (1H2023: -4 bp) due to the absence of the one-off writebacks that were taken last year as well as a sharp deterioration in its Thai loan book in 1Q 2024 where its management thinks that the worst is over.”
As such, Maybank and CIMB are expected to remain on track with their FY2024 credit cost guidance (<30 bp and 30-40 bp respectively) while RHB has exceeded its 20-25 bp target. Moreover, RHB’s non-performing loans (NPL) cover is also weaker than peers at 70% vs Maybank’s 124% and CIMB’s 101%.
Overall, CIMB has had a commendable 1H 2024 performance with return on assets (ROA) at 1.05% (+7 bp yoy), hence clearly taking the lead over Maybank which was at 0.96% (~flat yoy) with RHB’s ROA having dropped to 0.89% (-11 bp yoy), according to CreditSights.
“Capital continues to be strong across all three banks with RHB still having the highest common equity tier 1 (CET1) ratio at 16.5% (Maybank: 14.7%; CIMB: 14.5%),” added the research house. – Sept 6, 2024
