KUALA LUMPUR: Standard & Poor's Ratings revised its economic risk trend for Malaysia's banking sector to stable from negative, saying the industry risk trend remains stable.
It also revised the outlook for AmBank, RHB Bank and RHB Investment Bank to stable from negative.
"Our stable outlooks on Malaysian banks factor in our expectation that these banks will maintain their satisfactory financial profiles even as the domestic economy slows," the rating agency said.
It added that successive government measures since 2010 to counteract the stimulatory effect of low interest rates on consumer borrowing and home prices have been effective.
"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 per cent or less over the next 18-24 months."
S&P's said the Malaysian economy has lost some momentum due to a weak energy sector, tighter domestic spending due to the implementation of goods and services tax (GST), and uncertainties in global demand.
It expects an increase in credit losses from historically low levels but overall, it expects 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."
The outlook action today was from BBB+ negative to stable for AmBank (BBB+), RHB Bank (BBB+) and RHB Investment (BBB+).
S&P's also affirmed the stable ratings on four other banks – Public Bank (A-), Malayan Banking Bhd (A-), CIMB Bank (A-) and CIMB Investment Bank (A-).
In assessing Malaysia's potential exposure to economic imbalances due to household debt and the property market, Standard & Poor's looked for ‘consistent indications’ that increases in housing prices and consumer debt are moderating.
"In our view, the impact of recent government and regulatory policy initiatives will curtail potential systemic risk arising from the household sector. "
It expects the unemployment rate to remain slow and policy rates to remain stable, which would support the debt repayment ability of the household sector.