Yes, Malaysian banks are still doing okay

Just a few weeks ago, a colleague said something which I replied him seriously. He said, ‘I think Malaysian banks are doing badly.’ I asked him why he said so and he said look at all the retrenchment schemes which are happening. I told him off then that from all the financial quarters of Malaysian banks, I have yet to read about any banks suffering losses. Astor the retrenchment schemes, it’s best for them to do from the position of strength and not when they are not healthy. By then, everything would be worst. Today, I read about Standard & Poor’s Ratings Services revising their rating outlook for AmBank (M) Bhd, RHB Bank Bhd and RHB Investment Bank Bhd to stable. All three were rated ‘negative’ previously.

It said the major reason for this revision is due to the moderating economic risks for banks operating in Malaysia. In brief, their operations in Malaysia should be just fine. The economic risk trend for Malaysia’s banking sector has also been revised to stable from negative previously. It has also reaffirmed the stable rating for four other banks — Public Bank Bhd, Malayan Banking Bhd, CIMB Bank Bhd and CIMB Investment Bank Bhd. The expectations for these banks would be that they would be able to maintain satisfactory financial performance even with the slowing economy.

Their actual comments, “Overall, we expect the credit risk of Malaysian banks to remain manageable. Malaysian banks have been building up capital and provisioning buffers in the good years, which will mitigate some downside risks. We revised the economic risk trend for Malaysia because successive government measures since 2010 to counteract the stimulatory effect of low interest rates on consumer borrowing and home prices have been effective, in our view. In particular, the more stringent measures introduced in 2014 to curb property speculation have reined in prices. In our base case, we expect these steps to help keep the year-on-year inflation-adjusted rise in property prices to 4% or less over the next 18-24 months.”

I guess it’s clear that where banks are concerned, everything is going to be fine. Perhaps none would be springing a huge upside surprise for the next 12 months. However, to equate trimming of staffs and controlling of expenditure as banks in trouble is definitely wrong idea. Happy reading.

written on 25Nov 2015

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