Moody’s maintains stable outlook for Malaysian banks

KUALA LUMPUR: Moody’s Investors Service has maintained its stable outlook for Malaysia’s banking system this year in view of the continuous robust operating conditions in the country.

Financial Institutions Group vice-president and senior analyst Simon Chen said the projection was also based on the stable fundamentals of Malaysian banks, stable asset quality trend, as well as strong capital and liquidity buffers.

“What is really driving our stable outlook is how we are looking at the creditworthiness of banks in a particular country.

“The likelihood of any changes in the next 18 months is quite remote, so the rating is more towards stable,” he told a press conference on the outlook for the banking industry here today.

Nevertheless, Chen said the rating agency expected loan growth to be modest this year on the back of subdued sentiment within the corporate sector as it adopts a “wait-and-see” approach ahead of the Budget 2019 announcement.

He said Moody’s had revised the loan growth target downward to 5-6% this year, from 7-8% projected earlier.

“Previously, we were more optimistic that there might be a faster recovery (in loan growth), but now we are a bit more realistic.

“There is a need for policy clarity and what it means for Malaysian businesses. Until that happens, businesses will take a more cautious approach,” he said.

Commenting on the United States-China trade war, Sovereign Risk Group vice-president and senior analyst Anushka Shah said tensions could be prolonged as more measures could be taken this year and next year as well.

Within the region, she said Hong Kong and Singapore would probably be more vulnerable and exposed to any trade or tariff imposition, compared with others.

“The entire electronic supply chain tends to be more exposed.

“A lot of Asia Pacific economies are very closely linked to the supply chain and Malaysia is one of them,” she added.