Malaysian Banks Unswayed by Worldwide Moves to Cut Dividends

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As banks elsewhere scrap or defer dividend payments, investors in Malaysian lenders can still expect their usual cash rewards.

Malayan Banking Bhd., the biggest lender by market value, plans to keep its payout ratio of as much as 60% its profit after tax and minority interests, on top of paying a 2019 interim dividend on May 6, its spokesperson said. CIMB Group Holdings Bhd. is more cautious, saying dividend payments will depend on profits and liquidity needs even if banks currently have enough capital.

Regulators from the U.K. to Vietnam have advised lenders to cut or delay dividends to ensure they have enough buffers to weather an expected economic downturn. Malaysia has imposed no such guidance, with analysts expecting banks to maintain their dividend policy. Combined, the nation’s three biggest lenders announced 12.6 billion ringgit ($2.9 billion) in payouts last year.

“We opine that Malaysian banks are facing the current crisis in a position of strength,” said Imran Yassin Yusof, senior analyst at MIDF Amanah Investment Bank Bhd. “This is due to the fact that Malaysian banks are well capitalized and we believe that they will be able to weather the current crisis.”

A representative for Bank Negara Malaysia declined to comment.

Stress Test

The central bank has cut its policy rate by 50 basis points this year to 2.5% while releasing 30 billion ringgit into the banking system by lowering the reserve ratio and relaxing other capital requirements. Bank Negara Malaysia has also ordered banks to give an automatic loan moratorium for individuals and small businesses for six months and asked lenders to stress test their books against the impact of the pandemic.

“On the surface, anyway, there is no apparent need to hold back on dividends as BNM is opting for in-house policies,” said Stephen Innes, chief market strategist at AxiCorp Ltd.

Malaysia’s bank stocks declined on Monday with Maybank falling 0.5% while CIMB lost 0.3% as of 11:30 a.m. in Kuala Lumpur. The benchmark FTSE Bursa Malaysia KLCI Index advanced 0.1%.

Hong Leong Investment Bank Bhd. equity analyst Chan Jit Hoong said he wouldn’t completely discount the possibility of Malaysian banks deferring or reducing dividend payments.

“It really depends on how prudent BNM wants to approach the situation, after all, the loan moratorium of six months would have already somewhat affected banks’ cash flow in the short-term,” he added. “However, if I have to stick my neck out to make a view, I would argue for a case of intact dividend payouts but at a lower proportion compared to last year.”

©2020 Bloomberg L.P.

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