KUALA LUMPUR (Feb 27): Malayan Banking Bhd (Maybank) is expecting net interest margin (NIM) to narrow by five to eight basis points (bps) this year as central banks are seen slowing their pace in raising interest rates, while competition among peers is expected to intensify.
The bank, the largest in the country by asset size, has recorded a NIM of 2.39% for the fiscal year ended Dec 31, 2022 (FY2022), up 7bps from FY2021, against a backdrop of four overnight policy rate (OPR) hikes of 25bps each by Bank Negara Malaysia (BNM) last year.
In the last Monetary Policy Committee meeting in January, BNM decided to maintain the OPR at 2.75%, the first time the central bank stayed put in hiking its benchmark interest rate since May last year.
“We expect a deterioration in NIM, with the stabilisation of interest rate increase, and of course competition across, not just on loans, but also on deposits,” Maybank group president and chief executive officer Datuk Khairussaleh Ramli told reporters at the group’s year-end results briefing on Monday (Feb 27).
Khairussaleh said Maybank’s loan growth is also expected to slow down to 4% this year, in line with the country's moderating gross domestic product (GDP) in 2023.
“Loan growth [for 2023] is expected to moderate, normally in Malaysia in particular, and in fact in some other countries [as well], loan growth tracks very closely to GDP. We do expect GDP to moderate this year, from 8.7% to about 4.0%, hence loan [growth] is also expected to moderate as well. If you look at the GDP of 4.0%, any growth above that is respectable,” he said.
In Malaysia, Khairussaleh said system loan growth is expected to moderate to 4.8% this year from 5.7% in FY2022.
For FY2022, the group achieved a loan growth of 6% to RM587.12 billion, driven by its Malaysian and Indonesian operations.
“We do believe we still have opportunities to grow as well, as I have mentioned, mortgage, SME (small and medium enterprise). And [for] SME, we believe there are opportunities to grow not just in Malaysia, Singapore and Indonesia, as we look at digitalisation, better data and enhancing sales force capacity et cetera,” said Khairussaleh.
Additionally, he expects asset quality to improve further as the economy continues to recover from the pandemic.
“[Net] credit charge (NCC), we are looking at between 35 and 40bps, and this is without us using any of the management overlay,” he said.
Maybank recorded NCC of 40bps in FY2022, down from 51bps in FY2021.
“Cost-to-income ratio (CIR), we think, will be around 47%... we have highlighted to the public and investment community last year, given the investment that we would require in M25+, this year up to 2024, we do expect our CIR to increase before it normalises again come 2025,” said Khairussaleh.
Under its M25+ corporate strategy, Maybank will invest between RM3.5 billion and RM4.5 billion over the next three to five years to accelerate technological modernisation, strengthen its business presence and improve customer satisfaction.
The group saw CIR rise to 46.4% for FY2022, from 45.3% in FY2021, driven by an increase in personnel expenses.
Shares of Maybank closed one sen or 0.1% higher at RM8.75, giving it a market capitalisation of RM105.47 billion.