Dividend payments to rebound in the local banking sector

by Tanisha Bhardwaj, Research Analyst, IHH Markit

14 February 2022 — With FY2021 year-end dividends to be announced in February 2022, IHS Markit expects a rebound of the Malaysian banking sector’s aggregate dividend by 26% in FY2021 year on year (y/y) to USD3.43 billion, after a 27.8% plunge in FY2020 due to COVID-19.

Expectations are for dividend payouts to increase by 4.6 percent year on year in FY2022, thanks to strong liquidity and capital buffers.

Dividends, on the other hand, show a mixed picture in FY2021. AMMB Holdings has decided to postpone dividend payments until the end of the year due to prudent capital management, whereas CIMB Group is expected to more than triple its year-end dividend compared to last year. Maybank and Public Bank will continue to be the leading dividend payers.

Dividend in 2022

Malaysian banking sector outlook for 2022 is stable as economic activity is expected to return to pre-pandemic levels, leading to more jobs and higher wages, as well as a gradual increase in interest rates that will help banks improve net interest margins and profitability.

However, there are still uncertainties around the COVID-19 pandemic and prolonged supply chain disruptions, as well as natural disaster risks, such as floods.

The upbeat trend is aligned with the regional sentiment across Southeast Asia. Banks from Thailand, Singapore and Indonesia are poised for steady growth for the new year.

Banking dividends for all four markets are expected to rise by 9.25% on average in FY2022.