Malaysian banks' core net profit up 17% in the first half of 2017

Maybank, CIMB and RHB saw double-digit growth in earnings.

Earnings momentum gathered pace in 2Q17 with sector core net profit up 22% YoY. As a result, cumulative 1H17 core net profit rose 17% YoY.

According to Maybank Kim Eng, 2Q17 operating income rose 8% YoY on average loan growth of 5.9% YoY and a 10bp expansion in net interest margins (NIM). Coupled with positive JAWS, operating profit rose at a faster pace of 10% YoY. Loan loss provisions were a marginal 2% lower YoY while other provisions dropped in the absence of the hefty Swiber bond provisions that Maybank and RHB had put through in 2Q16.

Here's more from Maybank Kim Eng:

2Q17 operating profit expanded YoY across the board for all banks. Maybank, CIMB and AMMB led with double digit growth rates, driven predominantly by 6-8% YoY loan growth, NIM expansion, and positive JAWS.

At the core net profit level, it was Maybank, CIMB and RHB that saw double-digit growth in earnings. Maybank saw its 2Q17 net profit surge 43% YoY in the absence of a MYR200m impairment provision on its exposure to Swiber bonds in 2Q16 as well as lower credit cost of 69bps in 2Q17 versus 88bps in 2Q16.

RHB saw lower provisions, also in the absence of MYR254m worth of provisions against Swiber in 2Q16, which led to a 43% YoY surge in 2Q17 net profit as well. CIMB reported a double-digit jump (+26% YoY) in its 2Q17 core net profit, led primarily by the 14% YoY rise in operating profit as well as lower credit costs.

1H17 saw Maybank and CIMB sustaining the double-digit core earnings growth pace, but AMMB and AFG saw their core net profit contract YoY on the back of lower recoveries for AMMB and higher credit cost for AFG.