Posted on 02 Mar 2016
Malaysia’s six largest banks are Malayan Banking (Maybank), CIMB Group, Public Bank, RHB Bank, Hong Leong Bank and AmBank.
“Operating conditions have weakened across the region, and the Malaysian banks have in particular seen the quality of their overseas loan books deteriorate,” Moody’s vice-president and senior analyst Simon Chen said in a statement yesterday.
“However, slower loan growth, optimisation of risk-weighted assets and capital raises have improved the banks’ capitalisation, a credit positive development that should help them weather the increasing challenges,” he added.
Chen was speaking on the release of a report titled “Banks – Malaysia: 2015 Results: Rising Credit Risks Balanced by Improved Capitalisation”.
Moody’s report highlights that banks with a greater focus on foreign lending, such as CIMB and Maybank have seen a greater increase in impaired loans and impairment changes in their key overseas markets of Indonesia, Thailand (CIMB) and Hong Kong (Maybank).
By contrast, Public Bank and Hong Leong Bank have a stronger home market bias, resulting in more resilient asset quality metrics.
Nevertheless, Moody’s expects the banks will also see their domestic asset quality deteriorate from the strong levels of the past three years, as the commodity and manufacturing sectors face increasing pressure from weak external demand and higher funding costs.
Looking ahead, Moody’s expects slower revenue growth will hurt the banks’ return on assets and internal capital generation in 2016, with the latter already under pressure from weak margins.
The banks have also indicated a slower and more cautious loan growth in overseas markets, and are increasingly focused on risk-adjusted capital allocation to negate the pressure on their capital levels.
Overall, however, Moody’s expects the banks’ capitalisation to remain robust and able to withstand the continuing challenges posed by slowing growth across the region.
