Banking sector’s asset quality still opaque — Analysts

KUALA LUMPUR: The banking sector’s asset quality is still opaque at this juncture, analysts note, with credit charge still elevated as further provisioning while necessary, fuelled more uncertainties as to the real extent of impaired loans.

The research arm of Kenanga Investment Bank Bhd (Kenanga Research) recapped that loans saw an uptick quarter on quarter (q-o-q) albeit in low single-digit as the economy reopened under the Recovery Movement Control Order (RMCO).

“Despite the positive vaccine developments, most banks are still cautious on their outlook or targets ahead maintaining concerns on further Conditional MCOs (CMCOs) and the efficacious and logistics of the vaccines are still in question,” Kenanga Research said.

“So far going into end of November, the take-up rate for the Targeted Repayment Assistance (post six-month moratorium) offered by the banks are quite muted but the banks do not discount uptick ahead depending on the impact of the current CMCO.

“As previously guided, post moratorium assistance is expected for 10 to 15 per cent of their loan book with most banks reporting such numbers so far.”

According to Kenanga Research, bottom 40 per cent (B40) exposure by the banks are relatively minimal with most reporting low teens exposure to their loans book.

The research arm highlighted that AMMB Holdings Bhd, CIMB Group Holdings Bhd and Public Bank Bhd (Public Bank) reported circa 10 per cent or below while those in low teens are Malayan Banking Bhd (13 per cent) and Public Bank (12 per cent) while RHB Bank Bhd reported 14 per cent under its retail loan book.