KUALA LUMPUR, Jan 7 (Bernama) -- Bursa Malaysia’s benchmark index rebounded from earlier losses to close at its intraday high on Wednesday, gaining 0.27 per cent in late trading as buying interest returned to selected heavyweights. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) advanced 4.48 points to 1,676.83 from Tuesday’s close of 1,672.35. The benchmark index opened 0.88 of-a-point lower at 1,671.47 and subsequently hit a low of 1,665.94 during the mid-morning session before gaining momentum toward closing. On the broader market, losers led gainers by 565 to 512, while some 526 counters were unchanged, 1,046 untraded, and 10 suspended. Turnover improved to 2.73 billion units worth RM2.76 billion versus Tuesday’s 2.66 billion units worth RM2.76 billion. Dealers said that investors were cautious following geopolitical developments in Asia.
Four of China's five largest banks reported lower second-quarter profits, as they responded to government pressure to reduce lending rates to stimulate weak loan demand in a slowing economy and struggling property sector. Despite this, all five lenders announced interim dividends for the first time in over a decade.
Key Highlights:
Decline in Profits: Industrial and Commercial Bank of China Ltd (ICBC), the world's largest lender by assets, posted a 0.8% drop in Q2 net profit, while China Construction Bank Corp (CCB) reported a 1.4% decline. Bank of China (BoC) and Bank of Communications (BoCom) also saw lower Q2 profits, although Agricultural Bank of China (AgBank) reported a 14.2% increase.
Pressure on Net Interest Margins (NIM): ICBC and CCB experienced a narrowing of their net interest margins, a key measure of profitability, with ICBC’s NIM falling to 1.43% from 1.48% at the end of June. This trend is expected to continue in the second half of 2024 due to mortgage repricing and government efforts to lower borrowing costs to support the economy.
Higher Dividends Despite Challenges: Despite lower profits, all five banks announced interim dividends, reflecting a push by the Chinese government to boost investor returns. BoCom, for example, will make an interim cash payment of 0.182 yuan per share, totaling 13.52 billion yuan, to be distributed early next year.
Property Sector Impact: The banks face rising risks from bad loans in the property sector. While some, like BoCom, warned of increasing bad debt from developers, others, such as BoC, plan to boost mortgage lending and consumer loans despite falling demand. Residential mortgages have decreased to 17% of the Chinese banking sector's total loans by the end of 2023, down from 21% two years earlier.
Stability of Non-Performing Loans: Despite the challenges, non-performing loan ratios among the five largest banks remained stable or slightly decreased, though concerns about the property sector's contagion effects persist.
The banks’ profitability is under pressure from weak loan demand, lower lending yields, and higher dividend payouts, compounded by ongoing challenges in the property sector and the broader economic environment.
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