PETALING JAYA: The pre-tax profitability of banks is expected to see an enchancment this year on greater internet curiosity margins (NIMs) and decrease loan-loss provisions. This is supported by an anticipated improve in rates of interest within the later a part of the year and faster mortgage progress, which can then lend help to a rise in NIMs.
Moody’s Investors Service famous, nevertheless, that banks might proceed to take precaution in opposition to potential credit score losses from loans which are underneath the compensation help programme.
A results of this would see loan-loss provision declining however remaining higher than pre-pandemic ranges, it stated.
“We expect impaired loans to increase in 2022, but only moderately because the economic recovery and continued aid from the government will support borrowers’ repayment capacity. Regulatory measures such as the targeted repayment assistance programme for vulnerable borrowers affected by the pandemic helped banks maintain stable asset quality,” Moody’s stated in its report yesterday.
“The asset-weighted average of the six largest Malaysian banks’ impaired loan ratios decreased modestly to 1.8% as of Sept 30, 2021 from 2% a year earlier, although about 28% of total loans at the banks were under the repayment assistance scheme, some of which can become impaired,” it added.
Meanwhile, it additionally famous that an earlier introduced one-off prosperity tax will see some affect to sector-wide internet profitability of the banks, however its affect will probably be partially offset by the sturdy pre-tax earnings progress.
“We expect bank’s capital ratios to be broadly stable at high levels in 2022 because internal capital generation will keep pace with increases in capital consumption due to faster loan growth. Prudent dividend policies and dividend reinvestment plans will help banks preserve capital to fund an acceleration of credit growth,” Moody’s stated.
It famous that the {industry}’s frequent fairness tier 1 ratio was at a robust degree and stood at 14.6% on the finish of final year.
Moody’s can also be anticipating industry-wide mortgage progress to strengthen to 6%-7% in 2022 from 4.5% final year, supported by recovering credit score demand from the retail and company segments.
Loan progress will probably be supported by the nation’s actual gross home product (GDP) progress, which might speed up to round 6% in 2022 from 3.1% in 2021. It could be pushed by will increase in home consumption amid an bettering labour market and export progress, the analysis home stated.
“The government has set its expansionary budget to RM332bil for this year from the previous year, and this will further support economic recovery,” Moody’s stated.
On one other matter, it stated that the debt servicing capability of corporates and households will stay sturdy and help banks’ asset high quality.
