KUALA LUMPUR, March 10 — RAM Ratings has maintained a stable outlook for the Malaysian banking industry this year, despite lingering macro uncertainties.
In a statement, the credit rating agency said it expected the Malaysian economy, which has been projected to remain resilient at 5.3 per cent this year, to continue to support the health of the local banking system.
It said macro-prudential measures have resulted in declining overall loan growth to 9.3 per cent in 2014 from 10.6 per cent in 2013 and would continue to ease further to 7.0 per cent this year.
“Our stress test shows that the Gross Impaired-Lan (GIL) ratio will remain healthy at below 2.5 per cent in 2015.
“This forecast considers our estimates of the system’s loan exposure to 1Malaysia Development Bhd (1MDB), as well as, a potential uptick in GILs from the oil and gas, property and vulnerable household segments,” it said.
RAM Ratings also added that 1MDB would not pose a systemic risk to the banking system due to banks’ sound capital buffers.
Malaysian banks were also well-positioned to weather various challenges in 2015 given the system’s strong regulatory framework.
On Islamic banking, the agency believed that the creation of an Islamic bank with greater financial clout and reach was still on the agenda given Bank Negara Malaysia’s goal of strengthening Malaysia’s leadership in Islamic finance.
The Islamic banking industry, which represented 22 per cent of the Malaysian banking system’s assets, had seen its assets almost double in the last four years to RM479 billion as at end-December 2014.
“Our expectation is that financing growth will still be robust at 15 per cent this year despite tighter macro-prudential measures and the more challenging economic environment,” it added. — Bernama
