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Malaysian banks' solid performance to continue in 2018

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13th-Mar-2018       
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Xinhua, Kuala Lumpur :
Moody's Investors Service said Monday that its six rated Malaysian banks that showed a solid performance last year, may see additional improvement in some areas this year.
Moody's vice president and senior analyst Simon Chen said in a statement that the asset quality and profitability of the six banks generally improved in 2017, while their capitalization and funding remained adequate.
"We expect loan demand to recover further in 2018, strengthening profitability, but also tightening funding conditions," he said, adding that profit growth among banks with weaker deposit franchises could be limited by higher funding costs.
The six banks are Malayan Banking Bhd, CIMB Group, Public Bank, RHB Bank, Hong Leong Bank and AmBank Malaysia, according to the statement.
Moody's also noted that asset quality will benefit from stronger macroeconomic conditions in 2018, both domestically and regionally, while those banks with exposure to the oil and gas sector should see their asset quality stabilize on stronger oil prices.
The impaired loan ratios of most banks remained stable in 2017, despite the fact that banks with sizable operations in other parts of Southeast Asia recorded higher gross impaired loan ratios because of asset quality issues among commodity related corporate borrowers, it said.
According to Moody's, most banks posted improved profitability in 2017, driven by steady revenue growth, stable net interest margins and a moderation in credit costs.
"These favorable conditions should continue into 2018, and ongoing digital transformation efforts will support stronger growth in revenue and cost efficiencies," it said.
It also believed their loan growth will also rebound in 2018, supported by higher demand for corporate loans and stable consumer lending, and this development, plus stable net interest margins, will support bank profits.
"Funding profiles remain resilient, as loan to deposit ratios fell slightly for most banks in 2017 because of sluggish loan growth, but are likely to rise in 2018 when loan growth recovers," it said.

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