KUALA LUMPUR, Sept 18 ― Malaysian banks are expected to have a worse performance than in the 2008 global financial crisis, but is not likely to plunge to the 1997-1998 Asian financial crisis levels, research house Credit Suisse has said.

According to The Star Online, Credit Suisse cited a string of “bad news” ― including the ringgit plunge, sell-off in the bond market, falling oil prices in recent months ― as contributing to the Malaysian banking industry’s earnings risk.

Such bad news are affecting the banks’ revenue and asset quality, while Credit Suisse also noted that volatility in commodity prices and currency rates usually result in greater credit cost for banks.

“Given that market volatility seems reminiscent of the previous periods of crises, we make comparisons with the Asian Financial Crisis (AFC) and Global Financial Crisis (GFC).

“Our findings suggest that the prevailing environment could be worse than the GFC but not as bleak as the AFC,” it was quoted saying in a note yesterday.

Among other things, the research house noted that the ringgit was weaker and more volatile in comparison to the global financial crisis period, but had yet to slump to the record low during the Asian financial crisis of RM4.71 against the US dollar.

It also took note that Malaysia currently has higher government debt levels and higher household debt levels, along with higher interest rates amid lower oil prices in comparison to the global financial crisis period.

Credit Suisse said Malaysian banks’ earnings estimate are believed to have greater downside risk that has yet to be reflected in their valuations.

“We have Underperform ratings on the large banks (CIMB, Public and Maybank) as they are the most crowded trades and we believe their valuations are yet to reflect the rise in earnings risk,” it was quoted saying.

The research house said it viewed smaller banks including HL Bank and Alliance more favourably as they are more under-owned by foreign investors and have relatively higher cash dividend yields, The Star Online reported.