Stable bank performance expected in 2018. Positive. 

Healthy banks in Malaysia are crucial to the our property market. Imagine if the banks are fighting fires daily, there’s no way they will be encouraged to lend to people who want to buy property. I know some wants to say that even now getting a loan is extremely tough. However, bankssay they are still lending and I think they are telling the truth. Here’s that proof.  In fact if their (the banks) non performing loans (NPLs) start to increase, their lending requirements will definitely get stricter. This is to prevent any further deterioration of their NPLs. Fortunately for us, our banks are in good shape and will remain stable even in 2018 due to quality strong capital base, healthy funding and liquidity positions. Nope, not as per me but by Standard & Poor’s Global Ratings. Here’s that full article in NST. Malaysian banks to remain stable in 2018: Standard & Poor’s

As per the article, not all are extremely positive. Credit analyst Geeta Chugh said that credit demand is expected to be muted. She said, “The Malaysian economy faces a number of headwinds, including higher domestic indebtedness at the corporate and household lever, weak energy sector and tighter domestic spending following the Goods and Services Tax (GST).” (Hopefully she has her stats right because I do not agree with her assessment. Higher domestic indebtness is supported by appreciating assets too and energy sector has lesser and lesser influence on the domestic economy plus GST is not stopping spending but has enabled the government to be more selective on who should be taxed. Negative sentiment is the one stopping spending. As for demand, just look at the queue as soon as there are properties at awesome locations and super attractive prices….)  She however concluded that for NPLs, Malaysia is among the best performing banking systems in Asean along with Singapore. (Yes, ALONG with Singapore. Good enough for me.) Here’s that full article in NST again. 

If we would like to know the direction of the economy, then banks’ performance is a very good sign. If it’s getting bad, the NPLs would usually start accelerating followed by banks tightening their lending and interest rates raised which may then pressure the market further when some start to skip servicing their debts. Well, when it is good and seriously, very good, Bank Negara Malaysia (BNM) may still choose to increase the interest rates too. Haha. It’s a move towards normalisation, fight inflation as well as to stop over-investments or sometimes known as reckless buying of assets which may push up asset prices way too fast compared to the salary growth. Remember, when prices go up, it’s hard for it to come down.  It’s always a delicate balancing act. Happy investing yeah since it’s expected to be another slow year ahead. I mean, a good year ahead… for investors.

written on 7 Dec 2017

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