RAM ratings reaffirms stable outlook on Malaysian banking sector

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 this year with RAM’s Gross Domestic Product forecast at 4.5 per cent this year versus 4.2 per cent in 2016.

“We do not foresee a broad-based improvement in economic sentiment. Accordingly, the banking system’s loan growth is likely to remain flat at 5-6 per cent this year,” he said.

Wong said notably, the system’s asset-quality indicators have held up well with its gross impaired loan (GIL) ratio remaining at a historical low of 1.6 per cent as at end-January 2017.

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

However, the GIL ratio could increase to 1.8 per cent if such pressure persists whereby there is little evidence of widespread fragility, said Wong.

Based on its analysis of over 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 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.

Meanwhile, RAM Co-Head of Financial Institution Ratings Sophia Lee said signs of weakness had surfaced for unsecured consumer loans, amid the elevated level of retrenchments and spiralling cost of living.

“But, we do not expect further deterioration to be significant, taking into consideration the current accommodative interest rates and contained unemployment conditions.

She said amid weaker corporate earnings, competition from non-bank deposit-taking institutions and capital outflows, the banking system’s adjusted loans-to-deposits ratio had tightened to 87.2 per cent as at end-January this year.

“Competition for deposits is likely to stay keen as the funding environment remains highly sensitive to shifts in global sentiment.

Banks are emphasising stronger liquidity buffers in the uncertain economic landscape,” she said, adding that banks’ earnings were envisaged to remain pressured this year.

“Nonetheless, the Malaysian banking system is still well capitalised,” Lee added. – BERNAMA



NBFC cash loan against gold restricted to Rs 25,000: RBI

RBI reduced the amount to Rs 25,000 from the earlier Rs 1 lakh in line with the provisions of the Income Tax Act.

Non-Banking Finance Companies (NBFCs) cannot lend more than Rs 25,000 in cash against gold, the Reserve Bank said today. The earlier provision for NBFC was that high value loans against gold of Rs 1 lakh and above must only be disbursed by cheque. RBI reduced the amount to Rs 25,000 from the earlier Rs 1 lakh in line with the provisions of the Income Tax Act. “…the relevant threshold under the Income Tax Act, 1961 is Rupees Twenty thousand,” the central bank said, while amending the provisions for disbursal of loan amount in cash by NBFCs. This assumes significance in the backdrop of government’s focus on less cash economy and 

The government has demonetised old Rs 500/1000 notes on November 9 last year aiming to check black money, counterfeit currency and terror financing.

The decision created severe cash crunch in the country in the last two months of 2016 as 86 per cent of the currency was declared invalid.

RBI had placed several restrictions on cash withdrawals from the bank branches and ATMs.

However, with increasing pace of remonetisation, all the restrictions, except on savings bank account, have been lifted. The cash withdrawal limit on savings bank account too will be removed from March 13.