KUALA LUMPUR, July 7 — Malaysian banks reported an average net interest margin (NIM) of 2.5 per cent and expect price competition on loans to both retail and business sector to be an industrywide challenge next year, says Ernst and Young Malaysia (EY Malaysia).
Partner, financial services and country leader Chan Hooi Lam said Malaysia was categorised as an “established rapid growth market (RGM)”, where capital markets continue to develop and businesses seek longer-term, more complex financing and risk management products.
“Competition on loan pricing is typically most acute in established RGMs,” he said in a report, “Banking in Emerging Markets: Investing For Success”.
Nevertheless, he said Malaysia remained optimistic about growth prospects, where most respondents expected the economy to improve. This was against a backdrop of evaporated optimism across established markets, which see current account deficits and rapid credit growth.
Another concern for Malaysian banks was building capital towards meeting the global standards set out under Basel III while considering expansion across Asean.
Chan said further capital market liberalisation measures that Prime Minister Datuk Seri Najib Razak announced — set to take effect in 2017 — would further boost competition, increase product offerings, and drive regional integration. “All of which looks to provide significant growth opportunities to both local and foreign banks,” he said.
The EY report focused on 11 rapid growth markets defined as being at either a frontier, established or transitional stage of maturity. More than 50 leading financial services and over 9,000 retail banking customers took part in the survey.
It said spending on IT would rise by 14 per cent over the next four years, with the most rapid growth expected to be felt in the emerging markets.
The report said new entrants to the market, including foreign banks and non-banks, were intensifying levels of competition.
“Unsurprisingly, 67 per cent of Malaysian respondents see banks in neighbouring countries as a threat, while European banks are on the radar of 47 per cent of Vietnam respondents; and Japanese banks represent a significant threat for all Indonesia respondents,” the report said.
Other countries covered in the survey were Kenya, Nigeria, Colombia, Egypt, Chile, Mexico, Turkey and South Africa. — Bernama
