Moody’s: Malaysian Bank Loans Under Covid-Linked Repayment Assistance Up To 27% July-August | Money


A pedestrian walks past a branch of Publc Bank in Kuala Lumpur on July 9, 2021. – Photo by Firdaus Latif

NEW YORK, September 13 – Malaysia’s six largest banks have reported that repayment assistance loans linked to the Covid-19 pandemic increased by an average of 27% of total loans between July and August 2021 , rising from 12% in March to May.

This was driven by the retail and small and medium-sized enterprise (SME) segments, after Bank Negara Malaysia (BNM) expanded the program to support a larger group of borrowers alongside the extension of a full foreclosure in June, Moody’s Investors Service (Moody’s) said.

“Although this will lead to a deterioration in the quality of banks’ assets, we do not expect a large increase in nonperforming loans (NPLs) as most applicants to the program will likely have sufficient financial capacity to repay their debt upon completion. of the program, “he added. noted.

In his sector commentary, “Banks – Malaysia: Repayment Assistance Loans Increase But Deterioration in Asset Quality Will Be Limited,” he said the banks were Hong Leong Bank Bhd, Public Bank Bhd, CIMB Group Holdings Bhd, Malayan Banking Bhd, RHB Group Bhd and the AmBank group.

From July 7, 2021, all requests from individuals and SMEs for deferral of payment and reductions in advance payments are automatically approved, without justification.

Previously, only applications from B40 income households and micro-enterprises were automatically approved.

“We expect that most of the repayment assistance loans will continue to perform after the six-month measure expires.

“One reason is that while the high volume of applications in July indicates that stressed borrowers may have increased, many had requested the program to take advantage of its easy requirements and save money, not because they are facing serious financial difficulties, according to the banks., “It said.

In addition, Moody’s said that a gradual lifting of strict measures to contain the coronavirus outbreak would support economic growth, leading to overall improvements in the repayment capacity of currently struggling borrowers.

The number of applicants fell in August and the banks do not expect it to rise again.

However, he noted that some asset risks remain in the short term.

He said the central bank was forecasting slower economic growth in the second half of 2021, while the unemployment rate remained high at 4.8% in June 2021.

An uneven economic recovery will continue to strain some borrowers operating or working in sectors hardest hit by the pandemic.

“Loans that have been the subject of several rounds of aid are also particularly vulnerable.

“Nonetheless, banks will continue to increase provisions for loan losses,” he said.

The loan loss reserves of the six banks, excluding regulatory reserves, increased to 166% of gross impaired loans on average at the end of June 2021, from 106% a year earlier.

The six banks also have strong capital buffers to absorb unexpected strains, with an average Common Equity Tier 1 of 14% at the end of June 2021, he added. – Bernaama

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