KUALA LUMPUR: Moody’s Investors Service expects liquidity of Malayan Banking Bhd (Maybank), CIMB Group Holdings Bhd and Public Bank Bhd to remain strong despite the Covid-19 pandemic, underpinned by deposit growth.
In its latest report, the credit ratings agency said the capitalisation of Malaysia’s three largest banks by assets should remain stable as capital generation would outpace capital consumption due to weaker loan growth.
“The banks’ strong loss-absorbing buffers will help mitigate the rise in asset risk, with loan loss reserves exceeding 100% of impaired loans at most banks as of March 2020,” said Moody’s vice-president and senior credit officer Alka Anbarusa.
According to Moody’s, the share of impaired loans of CIMB increased 36 basis points to 3.4%, while Maybank’s impaired loans grew seven basis points to 2.7%, largely driven by new loan impairments in Singapore and Indonesia.
Meanwhile, it said asset quality was stable at Public Bank, which is more focused on the Malaysian market with 80%-90% of its loans under repayment moratoriums.
“By comparison, so far, just 45%-50% of loans were under moratoriums at CIMB and Maybank, although the banks expect the percentage could increase,” it said.
However, the report cautioned that the three banks are facing growing pressure on profitability from the Covid-19-led downturn, with asset quality likely to deteriorate from 2021 as loan repayment moratoriums expire.
“A sharp increase in credit costs and contracting net interest margins will weigh on the profitability of all three banks this year, while the impact on asset quality will become evident only from 2021 as a large share of loans will remain under moratoriums for most of the year,” said Alka. – May 29, 2020, Bernama
