By Kuala Lumpur Newsroom
KUALA LUMPUR (Mar 12) -- Six-rated Malaysian banks are expected to continue their 2017's "solid performance" into this year with additional improvements in areas including asset quality, profitability and a rebound in loan growth, Moody's Investors Service said today.
The six banks include Malayan Banking (A3/A3 stable, a3), CIMB Group Holdings (Baa1 stable), Public Bank (A3 stable, a3), RHB Bank (A3/A3 stable, baa3), Hong Leong Bank (A3 stable, baa1) and AmBank (M) (Baa1/Baa1 stable, baa3).
"The asset quality and profitability of the six banks generally have improved in 2017, while their capitalization and funding remained adequate," Vice President and Senior Analyst Simon Chen at the global ratings agency said. We expect loan demand to recover further in 2018, strengthening profitability, but also tightening funding conditions."
Stronger domestic and regional macroeconomic conditions in 2018 will benefit the banks' asset qualities, and lenders having exposure to the oil and gas sector should expect their asset quality to stabilize on stronger oil prices, Moody's said.
Steady revenue growth, stable net interest margins and a moderation in credit costs boosted most banks' profitability in 2017 and these factors are expected to continue in 2018, Moody's said. Digital transformation efforts will also support revenue growth and cost efficiencies.
Higher demand for corporate loans and stable consumer lending will help loan growth to rebound in 2018, which along with stable net interest margins will also support banks' profits, it added.
Increased credit charges required under the Malaysian Financial Reporting Standards 9 (MFRS 9) effective Jan. 1 will be a key factor to drive overall credit costs "slightly" higher from 2017 level, Moody's said.
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