BUSINESS

MALAYSIAN BANKS ABLE TO MAINTAIN PROFITABILITY LEVEL -- S&P GLOBAL RATINGS

29/09/2021 02:04 PM

KUALA LUMPUR, Sept 29  -- Malaysian banks are able to maintain the current level of profitability but credit cost is forecast to be around 50 basis points (bps) and 60 bps in 2021 and 2022 before recovering gradually, said S&P Global Ratings today. 

Associate director Nancy Duan said the loan moratorium was not unique to Malaysia, being also adopted by financial institutions globally during the COVID-19 pandemic.  

In its base case, the rating agency expects Malaysia's banking industry's non-performing loan (NPL) ratio to reach 3.0 per cent to 4.0 per cent by end-2022. 

"We are essentially looking at high default rates for industries such as agriculture, mining, manufacturing, construction and retail as well as households. 

"Given that households account for 59 per cent of the Malaysian banking sector's loan book, even a one per cent increase in the household default rate will translate to the increase of sector-wise NPL ratio,"  she said during a question-and-answer session at a webinar on Malaysia Banking Sector Update today. 

Delayed economic recovery, repeated moratorium distortion and negative government intervention in earnings/operation threaten to materially erode the buffers Malaysian banks had before the pandemic, the rating agency said.

Duan noted that Malaysian banks' exposure to China's Evergrande Group was limited as their focus was mainly on the Southeast Asian region. 

"We do not expect any material exposure from Malaysian banks to Evergrande, and also Malaysian banks are known to be quite prudent. Even for the capital market investments, we do not expect they hold material portions of the high-yield Chinese property developer's debt," she added. 

Meanwhile, S&P Global Ratings said an increased risk of negative government intervention is also seen in the Malaysian banking industry, reflected in the repeated government intervention in relief measures given out by domestic banks such as the recent announcement to waive off fourth-quarter interest for bottom 50 per cent income (B50) customers.

It noted that such interventions could recur, given the ongoing political instability, and impede the banking sector's ability to operate commercially.

-- BERNAMA

 

 


BERNAMA provides up-to-date authentic and comprehensive news and information which are disseminated via BERNAMA Wires; www.bernama.com; BERNAMA TV on Astro 502, unifi TV 631 and MYTV 121 IFLIX channels and BERNAMA Radio on FM93.9 (Klang Valley), FM107.5 (Johor Bahru), FM107.9 (Kota Kinabalu) and FM100.9 (Kuching) frequencies.

Follow us on social media :
Facebook : @bernamaofficial, @bernamatv, @bernamaradio
Twitter : @bernama.com, @BernamaTV, @bernamaradio
Instagram : @bernamaofficial, @bernamatvofficial, @bernamaradioofficial
TikTok : @bernamaofficial

© 2024 BERNAMA   • Disclaimer   • Privacy Policy   • Security Policy