February 26, 2019 / 5:56 AM / 5 months ago

UPDATE 2-Malaysia's Maybank posts best quarterly profit in 2 years, but flags risks

* Profit at 2.33 bln ringgit on 3.7 pct rise in revenue

* Net interest income rises 2.9 pct

* Wary of moderating global growth, trade tensions

* Expects NIM compression of 3-5 bps for 2019 (Adds executive comments from briefing, details of results)

By Liz Lee

KUALA LUMPUR, Feb 26 (Reuters) - Malaysia’s Malayan Banking Bhd (Maybank) beat expectations with a 9.1 percent rise in quarterly net profit, its highest profit in two years, as Islamic banking income soared and net interest income grew.

But the Southeast Asian nation’s largest lender by assets flagged its profitability would be under some strain this year due to higher costs, and also said uncertainty in long-term domestic economic policy was impacting its clients.

Net interest margin - a key measure of bank profitability - fell 3 basis points in 2018 to 2.33 percent and the bank expects a further compression of 3-5 basis points this year, pressured by potential deposit competition.

While the bank expects stable economic growth in Malaysia, its biggest market, it noted uncertain longer term economic policy was still a concern for the market.

“Many of our clients (who are) institutional investors...would like to know a bit of clarity on the medium to long term economic policies - where do we want to go, which sectors are we focused on, what are we going to do about creating new employment, what are we going to do about creating a better environment for new investments,” Group president and CEO Abdul Farid Alias said at the bank’s results briefing.

Malaysia’s economic expansion quickened to 4.7 percent in the quarter, bolstered by resilient export growth.

The central bank said it expects the economy to remain on an even growth path, supported by steady domestic demand and improving external appetite for Malaysia’s exports.

But some economists have earlier pointed out that a lack of clarity from the government on corporate incentives may have crimped Malaysia’s economic expansion as companies halt or slow plans for more investment.

Maybank recorded a net profit of 2.33 billion ringgit ($572.48 million) for October-December compared to 2.13 billion ringgit in the same period a year earlier. The result beat the 2.14 billion ringgit average of three analyst estimates compiled by Refinitiv.

Net interest income rose 2.85 percent to 3.1 billion ringgit while Islamic banking income rose 21.4 percent to 1.5 billion ringgit during the period, according to a statement from the bank. Revenue rose 3.7 percent to 12.23 billion ringgit.

Maybank’s net earned insurance premiums increased 4.8 percent to 1.5 billion ringgit, lending further support to its quarterly performance.

The bank, whose main markets are Malaysia, Singapore and Indonesia, also reported lower allowances for impairment losses on loans.

“Against the backdrop of moderating global growth and uncertainty over trade tensions, Maybank Group will maintain its balance sheet expansion in line with forecast economic growth of its three home markets and in tandem with the Group’s risk posture,” the bank said.

In Indonesia, it will remain focused on corporate lending growth among top-tier clients and expanding fee income streams through strategic partnerships in bancassurance and general insurance as well as e-channel transactions, it said. ($1 = 4.0700 ringgit)

Reporting by Liz Lee; Editing by Christopher Cushing and Muralikumar Anantharaman

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