KUALA LUMPUR: Bank Negara Malaysia’s directive for banks to offer automatic moratorium to individual and SME borrowers is meant to cushion short-term stresses on the banking system, analysts said.
If otherwise left on its own, the impact of the Covid-19 pandemic might give way to larger systemic issues, they added.
Bank Negara yesterday directed, among others, banks to give automatic moratorium on all loans, principal and interest (except credit card balances) for six months until September this year.
To support lending activities and the economy generally, lending requirements to the property sector, share financing and unit trusts have been immediately uplifted.
Bank Negara also allows banks to draw down the capital conservation buffer of 2.5 per cent, operate below the minimum liquidity coverage ratio of 100 per cent and reduce regulatory reserves held against expected losses to zero per cent.
Kenanga Research described the measures as timely and sensible.
“It is precisely in recognising that the economic situation can normalise after Covid-19 comes to pass in a matter of months that the materialisation of that outcome must be enabled.
“And to enable that requires these very measures that Bank Negara had the foresight to implement. Of course, there is still that remote chance that Covid-19 prolongs longer than it should - beyond this six-month moratorium - in which case, credit costs will shoot up and the outlook for the entire economic and financial system would then be extremely dire,” it said.
Kenanga Research said sceptics may point to prudential lending standards being compromised and call for some form of sector derating to price in heightened risk.
But it sees such a price worth paying to avoid a larger mess developing.
“One hopes that the Covid-19 issue does really come to pass within the next six months, confidence restored and servicing of loans can take on its normal rhythm,” the firm said.
Public Investment Bank Bhd (PublicInvest) said on face value, the moves appearef to be net negative to the sector given the lower interest income receipts for six months.
Nonetheless, PublicInvest said it was necessary to stem potential asset quality issues which may have an even more negative impact on the sector and consequently, stock valuations.
“The sector is currently facing a triple threat of compressed margins (from possibly more overnight policy rate cuts), slower loans growth (from sluggish economic momentum) and weaker asset quality (through possible business shutdowns),” it added.
PublicInvest said banks had faced the brunt of the recent selling pressure.
Some are trending significantly lower to -2SD (standard deviations) below their long-term price-earnings averages.
While maintaining its “neutral” stance on the sector given the lack of clarity on earnings prospects at this juncture, the firm said trading opportunities of the likes of RHB Bank Bhd and Public Bank Bhd are attractive.
PublicInvest continues to like AMMB Holdings Bhd and CIMB Group Holdings Bhd for their earnings growth stories.