Malaysian banks' profit growth slow to 8.8% in Q2

This comes from double-digit growth of 11.8% in Q1.

Malaysian bank earnings fell from double-digit growth of 11.8% in Q1 to 8.8% in Q2, according to UOB Kay Hian.

Banks were careful to keep their costs to a minimum in Q2 which helped in bringing operating costs down by 1.8% YoY and 3.4% QoQ.

However, revenue fell 3.3% QoQ as volatile capital markets and higher funding cost impact on NIM pushed down non interest-income by 5.3% YoY and 12.7% QoQ. The sector’s net interest income stream was able to eke out easily gains 1.1%.

However, the overall dismal performance translated to flat pre-provision operating profit.

“The recent 2Q18 results indicated a rather challenging revenue growth environment with most banks having to meet profit targets via stringent operating cost controls and lower provisions via loan recoveries. NIM compression in 2H18 could also pose as a slight dampener to earnings,” Keith Wee Teck Keong, analyst at UOB said in a statement.

Also read: Malaysian bank earnings growth may slow 9.7% in 2018 amidst new leadership

Keong believes that the prevailing competition for fixed deposits is amongst those putting pressure on NIM levels for the second half of 2018.

Moreover, Malaysian banks are set for a mild recovery in loans during the full-year amidst heightened policy uncertainties and cancellations of high-ticket infrastructure projects. 

“In terms of overall industry growth trends, we are maintaining our 5.0% to 5.5% growth forecast for 2018 with growth likely to come in at the lower end of the range,” he added.