RAM ratings reaffirms stable outlook on Malaysian banking sector

RAM ratings reaffirms stable outlook on Malaysian banking sector

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KUALA LUMPUR: RAM Scores has reaffirmed the Malaysian banking sector's secure outlook because the sector wrapped up a troublesome 2016 in fine condition.

The score company stated Malaysian banks remained resilient and anticipated the identical efficiency this yr.

Monetary Establishment Scores Co-Head Wong Yin Ching stated the financial system was poised for a fragile restoration this yr with RAM's Gross Home Product forecast at four.5 per cent this yr versus four.2 per cent in 2016.

"We don't foresee a broad-based enchancment in financial sentiment. Accordingly, the banking system's mortgage progress is more likely to stay flat at 5-6 per cent this yr," he stated.

Wong stated notably, the system's asset-quality indicators have held up properly with its gross impaired mortgage (GIL) ratio remaining at a historic low of 1.6 per cent as at end-January 2017.

This was regardless of pressures on sure sectors comparable to these associated to automotives, oil and fuel, metal and property improvement particularly smaller, cash-strapped gamers, he stated.

Nevertheless, the GIL ratio might improve to 1.eight per cent if such strain persists whereby there's little proof of widespread fragility, stated Wong.

Based mostly on its evaluation of over 700 listed non-financial corporations, RAM stated the general debt-servicing capacity of Malaysian corporates had remained wholesome regardless of declining profitability.

It added that the credit score high quality of family loans was anticipated to stay robust, supported by a benign financial surroundings and banks' usually prudent underwriting requirements for this sector.

Residential property mortgages, the mainstay of family loans additionally continued to show strong asset-quality indicators, stated RAM.

In the meantime, RAM Co-Head of Monetary Establishment Scores Sophia Lee stated indicators of weak spot had surfaced for unsecured shopper loans, amid the elevated degree of retrenchments and spiralling value of dwelling.

"However, we don't anticipate additional deterioration to be vital, bearing in mind the present accommodative rates of interest and contained unemployment circumstances.

She stated amid weaker company earnings, competitors from non-bank deposit-taking establishments and capital outflows, the banking system's adjusted loans-to-deposits ratio had tightened to 87.2 per cent as at end-January this yr.

"Competitors for deposits is more likely to keep eager because the funding setting stays extremely delicate to shifts in international sentiment.

Banks are emphasising stronger liquidity buffers within the unsure financial panorama," she stated, including that banks' earnings have been envisaged to stay pressured this yr.

"Nonetheless, the Malaysian banking system continues to be properly capitalised," Lee added. - BERNAMA