Maybank IB maintains positive outlook on banking sector

KUALA LUMPUR: Maybank Investment Bank Bhd (Maybank IB) is maintaining its positive outlook on the banking sector following the release of Bank Negara Malaysia’s (BNM) Financial Stability Review (FSR) for the second half of 2023 (2H2023) on Wednesday.

Based on the general takeaway from the FSR, the investment bank said although challenges remained for pockets of the economy, credit risks in both the business and household segments are very much under control, and the banking system as a whole remains financially solid to deal with these ongoing challenges.

“The overall credit quality remains sound, but there is continued stress in the small and medium-sized enterprise (SME) segment.

“Nevertheless, a widespread deterioration in credit quality is not expected amid an improving growth outlook for the economy,” it said.

On the household segment, it said although the household debt-to-gross domestic product (GDP) ratio remained elevated at 84.2 per cent as at endDecember 2023, 70.9 per cent of household banking system debt is held by middle- and higher-income borrowers with a monthly income of RM5,000 and above.

“Moreover, household financial assets recorded healthy growth of 5.8 per cent versus 4.7 per cent in June 2023, and was steady at 2.1 times total household debt,” it said.

Maybank IB reiterated that the banking system remains sound, supported by factors such as total loans under repayment assistance programmes which improved to 2.4 per cent of total banking system loans in 2H 2023 from 2.5 per cent in June 2023, and healthy aggregate Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) which stood at 161 per cent and 118 per cent, respectively.

Meanwhile, Hong Leong Investment Bank Bhd (HLIB) said the banking system continues to be resilient and supportive of financial intermediation activities, thanks to excess capital and liquidity buffers such as the strong Common Equity Tier 1 capital ratio of 15 per cent and robust LCR of 161 per cent and NSFR of 118 per cent.

“The updated stress-test continues to show that the banking system is resilient and can stomach adverse shocks,” it said in a separate note yesterday. — Bernama