Malaysian banks' earnings growth may slow to a mere five to six percent increase in the second quarter of 2024 compared to the previous year as non-interest income activity slows.
According to CGS, the total net profit for the last quarter of June will probably reach RM8.6 billion to RM8.7 billion, which is lower than the RM8.75 billion in the first quarter of 2024. However, net profit increased 7.4% year-on-year.
Non-interest income was boosted by strong investment support. It is expected to decline from quarter to quarter and is partly driven by continued expansion in net interest income.
In its further statement, CGS advised Malaysian banks to look at the potential re-rating of management, increased dividend payments and the prospect of net interest margins.
However, investors should be wary of potential downside risks as weaker-than-expected economic growth could increase loan losses and reduce loan profits.
In addition, rampant inflation and high interest rates also affect loan growth and asset quality.
Hong Leong Bank shares have gained almost 2% so far this year, CIMB shares have soared more than 19%.
Public Bank has declined 4.7% year-to-date as it is Malaysia's third largest lender by assets and is currently struggling with a decline in net profit as overheads and higher provisions.
Meanwhile, non-interest income is forecast to grow only slightly in the second quarter to end the previous streak of growth. Charge revenue increased by nearly 15% in the first quarter of 2024 and it is expected to remain sustainable.
