Malaysia banking sector dividends expected to grow 26% in FY2021: IHS Markit

MALAYSIAN banking sector dividends are projected to increase by 26 per cent in FY2021 and 4.6 per cent in FY2022, said IHS Markit.

In a report released on Feb 8, the company said it predicts final dividends will climb by 14 per cent year on year (yoy) for the fiscal year ending December 2021, driven by CIMB Group's lower base as it decreased 2020 final dividends by as much as 60 per cent yoy.

IHS credited the projected growth in dividends to the banking sector's strong liquidity and capital buffers.

"Economic activity returning to pre-pandemic levels, adequate capital buffers and solid loan-loss provisioning will all help restore credit profiles," the company said.

Maybank and Public Bank are expected to be top dividend contributors for FY2021, said IHS.

It forecasts Maybank to pay a final dividend of RM0.3 per share for the fiscal year ended December 2021, bringing the annual dividend to RM0.58 per share. Dividend growth rate for FY2021 is anticipated to be similar to the FY2019 pre-pandemic rate at 12 per cent.

A NEWSLETTER FOR YOU

Friday, 8.30 am

Asean Business

Business insights centering on South-east Asia's fast-growing economies.

Sign Up

Meanwhile, Public Bank is projected to pay a final dividend of RM0.075 per share, bringing the annual dividend to RM0.15. The estimated annual payout ratio is 52 per cent, close to the level seen over the previous 3 years. Profits are likely to stay unchanged in FY2022 and IHS expects semi-annual dividends to remain unchanged as well, with the payout ratio remaining at the same level as FY2021.

This comes after the dividend payout plummeted by 27.8 per cent yoy in FY2020 as Covid-19 hit the global economy, with the total number of loans disbursed by the banking sector lower than the monthly historical average.

IHS also highlighted the mixed picture for dividends in 2021. The half-yearly banking sector average dividends grew by 6.6 per cent yoy but for year-end dividends, Hong Leong Bank, Hong Leong Financial Group and AMMB Holdings fell by 2.4 per cent.

The drop in dividends was mostly attributed to AMMB as it decided to hold dividend payouts until the end of the year because of cautious capital management.

IHS believes the outlook for Malaysia's banking sector in 2022 is stable and expects gross domestic product (GDP) to increase by 5.5-6.5 per cent due to the economy's expected return to pre-pandemic levels, more job opportunities and higher wages.

Higher wages and enhanced borrowing abilities are likely to be supported by greater efforts to boost productivity through digitalisation and upskilling, especially in lower-paid industries, the company noted.

With overall provision for probable credit losses in the banking sector at 1.9 per cent of total loans, banks continue to be prudent in loan loss provisioning, IHS said.

The company also holds that net interest margins and profitability of banks will improve with the gradual increase in interest rates.

IHS added that this upbeat trend is aligned with the regional sentiment across South-east Asia, following a positive overall dividend trend led by banks in Singapore, Malaysia and Indonesia

Singapore, Malaysia, Thailand and Indonesian banks are "poised for steady growth in the new year", IHS said. Banking dividends for all 4 markets are expected to rise by 9.25 per cent on average in FY2022.