“ The Rise of Liquidity Remains in Maybank, CIMB and Public Banks”

Moody’s Investors Service expects liquidity from Malayan Banking Bhd (Maybank), CIMB Group Holdings Bhd and Public Bank Bhd to stay high given the Covid-19 pandemic, underpinned by the rise in deposits.

The credit ratings agency said in its latest report that capitalization by assets of Malaysia ‘s three largest banks should remain stable as capital generation would outstrip capital consumption due to weaker loan growth.

High loss-absorbing buffers from banks would help offset the rise in asset danger, with loan loss provisions approaching 100 per cent of delinquent loans at most banks as of March 2020. According to Moody’s, CIMB’s share of impaired loans rose 36 basis points to 3.4 percent, while Maybank’s impaired loans expanded to 2.7 percentage points, mainly led by new borrower impairments in Singapore and Indonesia.

Meanwhile, at Public Bank, which is more focused on the Malaysian sector with 80-90% of its loans under repayment moratoriums, asset quality was steady.

By contrast, so far, CIMB and Maybank had only 45-50 percent of loans under moratoriums, while the banks think the number will increase.

However, the report warned that the three banks are facing increasing pressure from the Covid-19-led downturn on profitability, with asset quality likely to deteriorate from 2021, as moratoria on loan repayment expires.

In view of this, a significant rise in credit rates and the contraction of net interest margins would influence the profitability of all three banks this year, although the effect on asset quality should only become noticeable from 2021 as a substantial proportion of loans will be under moratorium for much of the year.

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