Malaysian banks’ recovery pace will be faster than regional counterparts, Moody’s says

KUALA LUMPUR (April 8): Moody’s Investors Service said in a report today that the asset quality of Malaysia’s largest banks has been more resilient to coronavirus-induced economic disruptions than their peers in Indonesia, the Philippines and Thailand.

This resilience, coupled with strong capital and liquidity buffers, will allow Malaysian banks to restore profitability faster than their regional counterparts, she said in a statement.

Moody’s analyst Li Tengfu said that despite the economic shock triggered by the Covid-19 pandemic, the asset quality of Malaysia’s largest banks remains strong, thanks to their greater focus on retail loans which are broadly secured, well regulated and backed by numerous financial assets. .

According to Moody’s, Malaysia’s largest banks have the smallest share of lending under regulatory relief programs compared to their regional peers (see the table). Loans under regulatory relief programs for Malaysia’s largest banks are mainly mortgages and secured auto loans, he added.

In contrast, loans covered by regulatory support measures in other countries are those primarily exposed to companies that have experienced a direct impact on cash flow and do not provide such liquid collateral, Moody’s said.

“This better asset quality will help Malaysian banks restore profitability faster than their peers, as the relatively lower risk of their assets will prevent them from having to maintain provisions as high as their peers.

“In addition, banks’ capital and liquidity buffers – although not as high as those of their peers – are still strong and sufficient to cover any potential financial stress,” he said.

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