Which bank is the weakest link among Malaysian banks in 1H16?

Its operating profit plunged 31%.

Maybank Kim Eng reports that three banks fared well operationally, with a double digit expansion in their 1H16 operating profit – RHB (+16% YoY), Maybank (+11% YoY), AFG (+10% YoY).

RHB’s profit expansion was driven predominantly by cost savings arising from its CTS scheme while Maybank saw robust growth in non-interest income (NOII), spurred on by higher marked-to-market investment gains. AFG’s earnings were higher YoY on the back of NIM expansion and strict cost control.

But the analyst also revealed two underperformers:

AMMB’s operating performance continued to be the weakest, with a 31% YoY plunge in operating profit. Topline was impacted by a sizeable 30bps decline in NIM, as well as weaker NOII. Operating expenses meanwhile rose 13% YoY. At the pretax profit level (ex-exceptionals), outperformers were RHB (+16% YoY) and AFG (+14% YoY) on stable credit costs while AMMB’s bottomline (-25% YoY) contracted less than its operating line (-31% YoY), supported by ongoing credit recoveries.

Maybank’s earnings took a dramatic turn, declining 15% YoY, on the back of a threefold increase in loan loss allowances to cover R&R loans that arose and which were classified as impaired during the period.