RAM reaffirms ‘stable’ outlook

KUALA LUMPUR: RAM Ratings has reaffirmed the Malaysian banking sector’s “stable” outlook as the sector wrapped up a difficult 2016 in good shape.

The rating agency said Malaysian banks remained resilient and expected the same performance this year.

Financial Institution Ratings Co-Head Wong Yin Ching said the economy was poised for a delicate recovery, with RAM’s gross domestic product forecast at 4.5 per cent this year versus 4.2 per cent last year.

“We do not foresee a broadbased improvement in economic sentiment.

Accordingly, the banking system’s loan growth is likely to remain flat at five to six per cent this year,” he said.

Wong said notably, the system’s asset-quality indicators had held up well with its gross impaired loan (GIL) ratio remaining at a historical low of 1.6 per cent as at end-January.

This was despite pressures on certain sectors such as those related to automotive, oil and gas, steel and property development, especially smaller, cash-strapped players, he said.

Based on its analysis of more than 700 listed non-financial companies, RAM said the overall debt-servicing ability of Malaysian corporates had remained healthy despite declining profitability.

It added that the credit quality of household loans was expected to remain strong, supported by a benign economic environment and the banks’ generally prudent underwriting standards for this sector.

Residential property mortgages, the mainstay of household loans also continued to display solid asset-quality indicators, said RAM. Bernama