Malaysia’s banking sector’s profitability may decline

KUALA LUMPUR: The country’s banking sector is likely to see its profitability decline as revenue growth slows and credit costs rise.

However, the banks’ capital buffers will further improve as a result of slower asset growth and this will help financial institutions withstand any increase in asset risks.

In its Banks-Malaysia: 2018 earnings update released yesterday, Moody’s Investors Service Singapore Pte Ltd said it expected asset risks to increase as macro-economic conditions deteriorated.

“Asset risks will grow in 2019, as business conditions deteriorate for export-oriented sectors, although strong loan-loss absorption buffers will mitigate the increased risk,” it said.

“The loan growth rate was projected to fall back to between 4% and 5% in 2019, as slower economic growth and uncertainty around the new government’s longer-term policy stance suppress loan demand among businesses and households,” he said.

Meanwhile, Moody’s said that most of the rated Malaysian banks, namely AmBank (M) Bhd, CIMB Group Holdings Bhd, Hong Leong Bank Bhd, Malayan Banking Bhd, Public Bank Bhd and RHB Bank Bhd, reported improvements in asset quality and capitalisation in 2018.

Source : TheStar