Banks ‘lost’ value but did not lose money.

Generally, banks in Malaysia are profitable. One earlier article on how profitable are some of them here. It meant that as long as its share price is not overpriced, it should be safe to hold on to those shares for dividends and potential capital appreciation. This meant little since the beginning of March, when the world is full of COVID-19 news. Stock markets worldwide had a bad day. Okay, many bad days… BURSA also dropped a lot and within the BURSA, all these listed financial counters lost as much as RM61 billion within less than one month.

Article The BURSA Malaysia-listed financial counters lost as much as RM61 billion in market capitalisation since the start of March 2020. The total market cap of nine financial counters fell 25.52% to RM239.06 billion on Wednesday (March 18) from RM300.07 billion on March 1, wiping out RM61.01 billion in market value accordingto Bloomberg data. The nine stocks comprise Malayan Banking Bhd, AMMB Holdings Bhd, RHB Bank Bhd, Hong Leong Bank Bhd, Affin Bank Bhd, Hong Leong Financial Group Bhd, Public Bank Bhd, Alliance Bank Malaysia Bhd and CIMB Group Holdings Bhd.

Bank Negara Malaysia (BNM) said the SRR will be lowered by 100 basis points (bps) from 3% to 2%, effective today. Each principal dealer will also be able to recognise Malaysian Government Securities (MGS) and Malaysian Government Investment Issues (MGII) of up to RM1 billion as part of the SRR compliance. The flexibility given to the principal dealers will be available until March 31, 2021. BNM also said the SRR is an instrument to manage liquidity and is not a signal on the stance of monetary policy. Article

A check on google showed the following for Public Bank. Based on the current share price, the potential dividend yield is 5.2% This is 30% higher than the Fixed Deposit rate. Of course no one knows if their profit numbers for 2020will be lower than 2019 yeah.

CIMB bank, based on its share price will give an even higher dividend yield. Take a look at below.

I do not own any unit in both banks and at the moment have not decided to buy either one. We should note that just because share price is dropping does not mean this is due to its dropping profitability. It may be due to the prevalent market sentiment which can be best described as jittery and well, just a follower of what’s happening in the world today. Happy understanding.

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