Maybank believes OPR already near bottom, further cut unlikely

KUALA LUMPUR: Malayan Banking Bhd (Maybank) does not foresee the Overnight Policy Rate (OPR) being lowered further than the current 1.75%, but its group president and chief executive officer Datuk Abdul Farid Alias (pix) is not discounting the idea completely either.

“If such a rate cut were to happen, it is expected to have a negative impact of 1 to 2 bps on our net interest margin (NIM),” he told reporters at Maybank’s second-quarter (Q2) financial results briefing today.

For the financial year ending Dec 31, 2020, the group stated that its NIM guidance widened to 20 basis points (bps) which incorporated the latest rate cuts in first-half 2020 and a “day-one” modification loss impact from the blanket moratorium amounting to RM314 million.

On the whole, Abdul Farid opined that the worst is over for the bank as it posted a net profit of RM941.73 million for the second quarter ended June 30, a 51.5% decline from RM1.94 billion reported in the same quarter of the previous year attributed to outsized impairment losses reported for the period.

“Our results are a reflection of what we have gone through, namely the movement control order, which was necessary to contain the spread of the outbreak; the subsequent policies on interest rates as well as the proactive measure on the moratorium which was meant to help all of us to have the opportunity to regroup and redraw our plans,” he said.

In Q2’20, Maybank’s revenue slipped 9.7% to RM11.79 billion from RM13.05 billion posted for Q2’19.

Its net operating income increased 5.3% to RM12.37 billion on the back of a 27.8% rise in net fee based income, mitigating a 3.4% decline in net fund based income.

For the cumulative period, the group’s net profit fell 20.2% to RM2.99 billion from RM3.75 billion posted for the corresponding period of the previous year.

Meanwhile, the group’s revenue stood at RM25.01 billion from RM26.03 billion reported previously.

Abdul Farid said given the fluidity of the current environment owing to the pandemic, Maybank is not proposing an interim dividend for the six-month period, as it continues to prioritise capital and liquidity preservation.

Noting that the performance of the banking sector reflects the overall economy, he said the purchasing managers index – a measure of economic activity – for Malaysia and globally for June and July has been above the 50-point threshold, which indicated economic expansion.

At the same time, the mobility index for many countries has improved substantially which implies an improvement in economic activity.

“Based on the data we have seen, the economy has indicated signs of improvement, but these gains will be contingent on our ability to control the spread of the pandemic,” he said.

Abdul Farid noted should the approval for a clinical trial for a Covid-19 vaccine by AstraZeneca come to pass in October, this could arrest the impact of the pandemic on the global economy.

With regard to its operations in Singapore, the bank expects recovery in the second half of the year to be sluggish and choppy, dampened by slow business reopening, border controls and foreign worker shortages.

However, it noted that policy measures to ensure cash flows to affected corporations and households might assist non-performing loan risks better than in the previous cycles.

In Indonesia, Maybank said the leniency provided by the regulatory bodies for loan restructuring might help prevent non-performing loan spikes. However, such a measure is likely to have a negative impact on its NIM.

source https://www.thesundaily.my/business/maybank-believes-opr-already-near-bottom-further-cut-unlikely-JB3704748