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KUALA LUMPUR: Moody’s Investors Service says that the higher capital buffers reported by Malaysia’s (A3 stable) six large banks for 2015 enhanced the banks’ resilience against rising credit risks, particularly in their overseas operations.
“Operating conditions have weakened across the region and Malaysian banks have in particular seen the quality of their overseas loan books deteriorate,” said Moody’s Vice-President and Senior Analyst Simon Chen said.
“However, slower loans growth, optimisation of risk- weighted assets and capital raises have improved the banks’ capitalisation, a credit positive development that should help them weather the increasing challenges,” he said when elaborating on a report titled, “Banks-Malaysia: 2015 Results: Rising Credit Risks Balanced by Improved Capitalisation”, released here today.
Moody’s report also highlights that banks with greater focus on foreign lending, such as CIMB Group Holdings Bhd ( Baa1 stable) and Malayan Banking Bhd (Maybank, A3/A3 stable, a3) have seen greater increase in impaired loans and impairment changes in the key overseas markets of Indonesia, Thailand (CIMB Group) and Hong Kong (Maybank).
By contrast, Public Bank Bhd (A3/A3 stable, a3) and Hong Leong Bank Bhd (A3/A3 stable, baa1) have a stronger home market bias, resulting in more resilient asset quality metrics, he said in a statement today.
Nevertheless, Moody’s expected the banks to see their domestic asset quality deteriorate from the strong levels of the past three years, as the commodity and manufacturing sectors faced increasing pressure from weak external demand and higher funding costs.
Looking ahead, Moody’s expected slower revenue growth to hurt the banks’ return on assets and internal capital generation in 2016, with the latter already under pressure from weak margins.
The banks have also indicated a slower and more cautious loans growth in overseas markets, and are increasingly focused on riskadjusted capital allocation to negate pressure on their capital levels.
Overall, however, Moody’s expected the banks’ capitalisation to remain robust and able to withstand the continuing challenges posed by slowing growth across the region.
Malaysia’s six largest banks are Maybank, CIMB Group, Public Bank, RHB Bank Bhd (A3/A3 stable, baa3), Hong Leong Bank and AmBank (M) Bhd (Baa1 stable, baa3). — Bernama
Operating conditions have weakened across the region and Malaysian banks have in particular seen the quality of their overseas loan books deteriorate. Simon Chen, Moody’s vice-president and senior analyst