KUALA LUMPUR, Feb 4 (Bernama) — The outlook for Malaysian banks this year is certainly going to be stable with their strong profitability providing a good first line of defence against risks, said Moody’s Investors Service.
Its vice president — senior credit officer, financial institutions group, Eugene Tarzimanov, said Malaysian banks were also generally well-capitalised, with low non-performing loans (NPLs) and all these acted as solid capital buffers against risk.
“Malaysian banks have solid capital buffers and low NPLs, and the credit growth is moderating only due to macro headwinds,” he told a media briefing on Moody’s 2015 Outlook for Malaysian Sovereign, Banks and Corporates, here Wednesday.
Deposit-based funding profiles and low reliance on market funding had supported Malaysian banks’ liquidity and funding profiles, he said
In terms of creditworthiness, Tarzimanov said, Malaysian banks were now ranked second in Asean, and fifth in Asia.
Malaysia’s Basel III implementation is mostly in line with global peers, he said, with capital rules in Asia generally stricter than Basel’s.
Tarzimanov said he expected local banks to register lower profits this year due to higher loan-loss provision and low net interest margin.
On Asian level, Tarzimanov said, the regional banking system outlooks for this year were also mostly stable with some headwinds presented only in highly-rated systems such as Singapore and Hong Kong, and systems with large legacy NPLs such as India and Vietnam.
He said interest rate increases in the US would likely be gradual in 2015 and if this happened it would have a mild impact on Asian interest rates, capital flows and liquidity.
“Overall, Asian banks are on solid footing against rising credit headwinds,” he saidd.
The international rating agency last week affirmed Malaysia’s bond and issuer rating at ‘A3’ with a positive outlook.
The ‘A3’ rating was based on the progress in Malaysia’s fiscal reforms and ongoing deficit reduction, credit concerns relevant to the rating action, coupled with fundamental strengths that remained intact.