Malaysia's top 3 banks beat regional gauge for total returns

Investors have been consistently satisfied.

Malayan Banking Bhd., CIMB Group Holdings Bhd. and Public Bank Bhd., all based in Kuala Lumpur, have given investors much to cheer about in the past five years, with each of the top three Malaysian banks by net loans beating the SNL Asia-Pacific Bank Index tracking total returns.

According to a report from SNL Financial, five-year total returns on Public Bank and Malayan Banking, or Maybank, were 173.70% and 135.13%, respectively, as of July 4, far outpacing a 64.64% gain in the index. CIMB Group returned 72.10%.

Meanwhile, aggregate loans and deposits at the three banks grew 27.45% and 21.38%, respectively, in the two years to March 31, while net income increased 12.18% to 3.34 billion Malaysian ringgit.

Maybank had the largest lending portfolio at 360.12 billion Malaysian ringgit as of March 31, with domestic loans making up 64% of the total.

The report noted that the majority of bank's foreign loans were sourced from Singapore and Indonesia, and that the company expects to earn 40% of its profit from overseas operations by the end of 2015.

Here's more from SNL Financial:

Malaysian banks are facing a slowing economy, which has quintupled to 786.69 billion ringgit in real terms in the past three decades through 2013. Malaysia's GDP growth decelerated to 4.69% in 2013 from 5.64% in the previous year, the slowest pace in four years amid weak overseas demand for the country's goods and services, coupled with subdued public investment.

The Malaysian central bank does not expect a drastic economic recovery in 2014, forecasting the country's economy will expand 4.5% to 5.5%, led by exports.

Malaysia relies heavily on global demand for its products, with exports of goods and services equivalent to 83% of the country's GDP, according to the Asian Development Bank.

The country's economic growth is also closely linked to the performance of China, its largest trading partner.
Malaysia has been singled out as the most vulnerable Asian economy by Oxford Economics because of its "high levels of public debt, rising external debt and shrinking current account surplus."

Some analysts also expect regulatory challenges to hinder growth in the country's banking industry in 2014.