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Nikkei Markets

Malayan Banking's 2Q net profit rises 18.1%

Islamic banking drives growth, lower provisioning also helps

Maybank's  income from Islamic banking was up 14%, while allowance for bad debts decreased by nearly 30% on year.   © Reuters

KUALA LUMPUR (Nikkei Markets) - Malayan Banking, Southeast Asia's fourth largest bank by assets, said Thursday net profit rose 18.1% in the second quarter from a year earlier thanks to lower provisions and higher Islamic banking income.

Net profit for the three months ended Jun. 30 was 1.96 billion ringgit ($474.72 million) compared with 1.66 billion ringgit over the same period last year, the lender, also known as Maybank, said in an exchange filing. Quarterly net interest income fell 2.5% on-year to 2.96 billion ringgit.

Maybank will focus on improving net interest margin after being cautious in the first six months of the year, Chief Financial Officer Amirul Feisal Wan Zahir said at an earnings briefing. The company also retained its return on equity target of about 11% for the year, he said.

Other operating income meanwhile fell 34% amid a decline in fee income and a loss in investment income. However, income from Islamic banking was up 14%, while allowance for bad debts decreased by nearly 30% on year.

Bulk of Maybank's profits comes from Southeast Asia, where it counts Malaysia, Indonesia, and Singapore as key markets. Loans grew 6.1% year-on-year in Malaysia, 8.9% in Singapore and 6.6% in Indonesia. Overall, loans across the group expanded 4.6% year-on-year.

Growth will likely come from consumer lending as well as wealth management segment and rising insurance premiums, said Amirul. Net interest margin, a measure of profitability from lending, will likely stay flat at June-end's level of 2.33% or decline "slightly," he said.

Competition for deposits in the second half will pressure net interest margin in Malaysia, Amirul said. In Singapore however, net interest margin is expected to expand from repricing intervals due to the higher rates, he added.

For its first six months, net profit rose 14% to 3.83 billion ringgit compared with 3.36 billion ringgit in the same period last year. Cost-to-income ratio was 46.9% and the company aims to keep the ratio around 48% for the year, Amirul said.

Shares of Maybank have recovered from its lows in June, gaining 1.6% year-to-date. The company had scrapped its dividend reinvestment plan in July due to soft equities market and opted to distribute an all-cash dividend.

The stock ended down 0.4% at 9.96 ringgit on Thursday, while the benchmark FTSE Bursa Malaysia KLCI was 0.1% lower.

--Jason Ng

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