MOODY’S Investors Service is more optimistic about Malaysian banks’ lending activities this year than some local research houses.
The international rating agency expects local banks to post between six and seven per cent loan growth this year.
This would be higher than the 5.3 per cent growth recorded last year, a sharp decline from 2015, fuelled by weak sentiment among corporates and consumers.
Moody’s vice-president Simon Chen said the expected loan growth expansion would largely be driven by the country’s stable operating conditions on the back of robust economic activities.
In the third quarter last year, average loan growth at seven of Malaysia’s top 10 banks, including Malayan Banking Bhd and Public Bank Bhd, was at 1.2 per cent, its weakest since at least the March quarter of 2014, according to Thomson Reuters data.
The likes of Maybank IB Research Bhd, for example, expect further moderation in loan growth this year with a lower forecast of 4.7 per cent.
RAM Ratings said the growth was likely to remain flat at between five and six per cent.
Overall, Moody’s expects to see a stable gross domestic product growth of between 4.3 and 4.5 per cent this year, in line with the government’s projection.
“Our projections are more optimistic this year as we do think that the business conditions here are fairly robust,” said Chen at the media roundtable on the outlook of Malaysian and Gulf Cooperation Countries’ Islamic banks, here, yesterday.
“We saw significant pressure on the (local) currency last year and there was a lot of uncertainties, especially for global investments. However, we see conditions improving and expect to see greater confidence and loans growth this year.”
Chen said the growth for the Islamic banking sector was more or less driven by the same factors affecting its conventional peers, namely better employment which would translate into higher housing loan contributions.
“There were reports on job losses last year, but the losses were from various sectors and a portion of the job losses were from foreign workers and not Malaysian workers,” said Chen.
“Therefore, the job losses did not translate into poorer debt servicing in the Malaysian workforce,” he said.
Chen said there won’t be much consolidation within the local Islamic banking segment because the conditions are robust enough for each bank to grow.
“We are not at a stage where we have to force consolidation in the Islamic banking segment as there are sufficient opportunities for the banks to grow. Islamic banks continue to be viable and the growth prospects are healthy.
“We do not yet see irrational price behaviours across players so we are not yet at the stage where we need to force consolidation,” he added.
Chen said the growth of syariah-compliant investment accounts, which make up 13 per cent of the country’s Islamic banking accounts of RM74.2 billion, are expected to remain strong for the next three to five years.
“Malaysian banks have strong incentives to promote the growth of such investment accounts because they provide capital benefits and an additional source of funding to grow assets,” he said.