Maybank set for longest slump in 22 years

MALAYAN Banking Bhd, Malaysia’s biggest bank, is set for its longest slump in 22 years in Kuala Lumpur trading, leading lenders lower on speculation bad debts will increase and capital-raising plans will erode earnings.

Malayan Banking, which last month announced a RM6 billion rights offer to boost capital, slid for an 11th day, losing 6 per cent to RM4.08 at midday, headed for the longest losing streak since January 5, 1987.

Public Bank Bhd lost 3.4 per cent to RM7.05, set for the lowest close since November 24, 2006.The Kuala Lumpur Finance Index declined 2.4 per cent to the lowest since October 6, 2003.

“Financial stocks are under a lot of pressure, there’s a lot of fear in the market on capital raisings; as long as that fear is around, you have to be mindful of it,” said Scott Lim, who oversees about US$800 million as chief executive officer of Amanah Asset Management Bhd in Kuala Lumpur.

“Investors are fearful of coughing up more money.”Malaysian Finance Minister Datuk Seri Najib Tun Razak this week announced a RM60 billion (US$16 billion) stimulus plan and warned that the Southeast Asian economy may contract this year for the first time in a decade as exports slide.

After the rights offer, Maybank stock “hasn’t found the bottom yet,” said Keith Wee, an analyst at OSK Research Sdn Bhd. In addition, the market has yet to “price in” the prospects of an increase in bad loans by banks in Malaysia, he said.

BankThere is no risk Public Bank will implement a rights offer, though there is concern the slowing economy will fuel an increase in bad debts and hurt the lender’s ability to pay higher dividends, Lim said.

Public Bank has fallen for eight straight days, the longest slide since 1991.Public Bank last month proposed a final cash dividend of 25 sen a share and a payment of one share for every 35 held. The bank didn’t immediately respond to telephone and e-mail queries from Bloomberg News.

“You might have to forecast a less optimistic outlook on the banking sector and the NPL provisioning could creep up,” Lim said. “There is a risk there, naturally your earnings will be affected, and therefore you cannot give as much dividends.”On March 10, Public Bank had its stock rating cut to “sell” from “outperform” by CLSA Asia Pacific Markets because of “weak” capital ratios. - Bloomberg