Slowing economy weighs on Malaysian banks' ops in S'pore

Two Malaysian banks have reported tougher operating conditions in Singapore. CIMB and Maybank, both of which released half-year results in the past week, said the challenging economic environment has weighed on their operations here.

CIMB, Malaysia's second-biggest bank, reported a 36 per cent rise in net profit at the group level to RM872.8 million (S$294 million) for the quarter ended June 30, from RM639.8 million in the same period a year ago.

This was largely fuelled by regional consumer loans growth, lower overhead costs and lower provisions, the bank said.

Still, it expects a challenging macroeconomic environment across South-east Asia for this half of the year, and will not be able to meet its 2016 targets for loan growth and return on equity.

The company lowered its loan growth target for the year to 6 to 7 per cent, from an earlier target of 10 per cent. "We are cautious on balance sheet growth, given the continued volatility and uncertainty in the external economic environment," said group chief executive Sri Zafrul Aziz.

Performance at CIMB Malaysia and CIMB Singapore are expected to be "subdued", in line with the slower economic environment in both countries, he added.

This comes after Malaysia's biggest lender Maybank said last week that it is keeping a close watch on loans made to the oil and gas sector, after posting a 27 per cent drop in quarterly net profit at the group level as allowances for loan impairment losses tripled.

Maybank Singapore registered higher net income of S$400.62 million for the half year ended June 30, compared with S$398.12 million in the previous corresponding period. This was on the back of a 21.6 per cent rise in net fee-based income, which was boosted by a rise in treasury and Islamic banking earnings, the bank said.

Net fund-based income, however, declined 8.6 per cent over the same period a year ago as higher funding costs led to a compression in net interest margin.

Pre-provisioning operating profit ticked up 0.2 per cent to S$221.82 million, but higher loan loss allowances resulted in the number coming in much lower at S$153.25 million, compared with S$199.64 million a year earlier. The higher loan loss allowance was "part of efforts to proactively restructure certain accounts against the backdrop of a weaker economic environment", the bank added.

A version of this article appeared in the print edition of The Straits Times on August 30, 2016, with the headline 'Slowing economy weighs on Malaysian banks' ops in S'pore'. Print Edition | Subscribe