Do you think banks are still doing fine? Are banks still resilient in Malaysia? After 6 months of moratorium and another 3 months of extension?
What happened during the moratorium, briefly? This was when banks were asked to continue paying salaries to all their employees (over 164,000 of them as per this report by BNM) BUT to allow borrowers to delay their loan payments for 6 months, what do you think would be the first thing which the banks did? They needed to check if they could survive…
Not many businesses I know could keep paying salaries but not receiving any payments for 6 months. Briefly, Malaysian banks was in a very good financial standing when the moratorium of 6 months were announced. What has happened to them today?
They seem to be still in good financial standing because out of all the applications for moratorium extension, they approved 98% of them. This extension lasts until end of 2020. Are banks still resilient in Malaysia? Would some banks go under? At the moment, there has been no such reports and in fact the following article just appeared with all the comments from prominent analysts who would have access to much more data than the public.
Article in themalaysianreserve.com MIDF Amanah Investment Bank Bhd (MIDF Research) analyst Imran Yassin Md Yusof stated in a research note yesterday. “The recently implemented Conditional Movement Control Order in Selangor, Putrajaya and Kuala Lumpur, we believe, will have limited impact on banks given the limited impact to overall GDP this year.” Recovery on loan repayment post-moratorium has reached 70% of pre-moratorium levels.
“With the automatic loan moratorium in place, the total banking system impairments and delinquencies have remained low, but are expected to increase in the period ahead.”
AmInvestment Bank Bhd analyst Kelvin Ong said despite the weaker earnings of banks in 1H20, weighed down by margin compression from the consecutive Overnight Policy Rate cuts and higher provisions for credit losses, banks maintained healthy capital and liquidity positions. Ong shared that the gross impaired loan ratio for the sector was at a low 1.5% due to most retail and SME loans placed under the automatic blanket loan moratorium for six months. Please do read the article which has a lot more predictions and analysis too. Article in themalaysianreserve.com
Many times, it’s about the timing. People without a job could get a job if they could have more time. Businesses who received a zero rental offer for a few months may be able to survive and start paying rental after those few zero business months. Forcing the business to close down does not benefit the owner because there is no guarantee there will be a next tenant within a short period of time. How many small businesses are thinking of expanding or starting under current circumstances?
Oh yeah, whether banks are resilient or not, just follow their quarterly reports. There’s really no need to speculate. If they remain profitable even if those profit numbers are down, they remain resilient. If they start to show that they could not hold on, start some rationalisation processes will start. For now, from all the readings and the signs, “Are banks still resilient in Malaysia?” I think our banks are still on a strong foundation. It’s eroding, that’s quite sure but again, it’s all about timing. Happy understanding.
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