Banks in Malaysia are well-capitalized to withstand stresses on asset quality, according to RAM Ratings.
In its Banking Scoreboard report, the rating agency said the asset quality of the 16 commercial banks remained resilient amid the weaker macroeconomic backdrop.
Public Bank, Hong Leong Bank, and Citibank stayed in the top three spots in terms of gross impaired loan (GIL) ratio, with all three banks reporting a commendable GIL ratio of less than 1% as at end-September 2019.
“The former two continued to see prudent and disciplined underwriting standards paying off while the latter benefited from changes in impaired loan classification policy to be in line with industry norms,” said RAM Ratings.
Based on the data provided in the report, Affin Bank has the highest GIL ratio in the commercial banking segment, followed by MBSB Bank and Maybank.
Meanwhile, RAM Ratings pointed out that the banks are well-positioned to weather looming asset quality challenges arising from the Covid-19 pandemic and plunging oil prices.
“The common equity tier-1 (CET-1) capital ratios of all the banks in our sample were above 12% as at end-September 2019. This is significantly higher than the minimum regulatory requirement of 7% and the more stringent capital requirements imposed on those designated as domestic systemically important banks (Maybank and CIMB: 8%; Public Bank: 7.5%),” stated the rating agency.
RAM Ratings also released its Islamic Banking Scoreboard report yesterday, which examines how Islamic banks operating in Malaysia compare against one another.
According to the report, HSBC Amanah, Public Islamic, and Hong Leong Islamic have registered much higher shares of retail deposits relative to peers, reflective of the banks’ strong consumer focus.
About 50% of HSBC Amanah’s deposits as of end-September 2019 came from the retail clients, followed by Public Bank (44%) and Hong Leong Islamic (36%).
The top three Islamic banks with the least retail deposits were Kuwait Finance House (7%), Al-Rajhi (7%) and Bank Muamalat (11%).
RAM Ratings also said that Islamic banks belonging to larger banking groups have a greater proportion of retail deposits to total customer deposits when juxtaposed with standalone Islamic banks.
“Aiding this is the ability of these entities to leverage on the extensive branch networks and other distribution channels of their conventional parents. As part of larger banking groups, the banks are also able to draw on strong parental funding support in the form of restricted profit-sharing investment accounts and interbank funding,” it said.