Outlook negative for top KL banks as economy slows<\/p>\n
KUALA LUMPUR (AFP): Standard and Poor's revised yesterday its
\noutlook for two of Malaysia's biggest banks, citing expectations
\nthat their asset quality and profitability will decline as the
\neconomy slows.<\/p>\n
The move implies possible cuts in the \"A-plus\" counterparty
\nrating for leading commercial bank Malayan Banking Bhd. (Maybank)
\nand the \"BBB\" counterparty rating for top merchant bank Arab-
\nMalaysian Merchant Bank Bhd.<\/p>\n
\"Both asset quality and profitability of Malaysian banks will
\nweaken as a result of the anticipated slowdown in the Malaysian
\neconomy as the government seeks ways to curb the six percent
\ncurrent account deficit,\" the credit rating agency said in a
\nstatement.<\/p>\n
\"Although the outlook is for a soft landing, it is expected
\nthat this is likely to lead to deterioration in asset-quality
\nproblems following a period of strong growth in domestic credit
\ndemand and the private sector's presently high leverage,\" the
\nadded.<\/p>\n
\"The recent drop in the Malaysian ringgit-U.S. dollar exchange
\nrate and local stock market prices over the past two months also
\nare expected to contribute to an increasingly difficult operating
\nenvironment.\"<\/p>\n
Standard and Poor's said it was particularly concerned that
\n\"bank borrowers may not have fully hedged their foreign-exchange
\npositions, which may ultimately lead to increased credit risks
\nbeing borne by the banking sector.<\/p>\n
Oversupply<\/p>\n
\"There is also increasing concern of oversuppply in some parts
\nof Malaysia's property sector that may lead to further asset
\nquality problems for banks which have direct property exposures
\nor property held as collateral against loans extended,\" the
\nagency said.<\/p>\n
\"While Malayan Banking holds a strong and competitive market
\nposition, its very size (21 percent of commercial banking assets)
\nmeans that Maybank is unlikely to avoid the impact of any system-
\nwide difficulty befalling the financial sector.\"<\/p>\n
The agency said it would meet with Maybank's management in
\ncoming months to both review its results for the year to June
\n\"and assess the probable impact of the impending economic
\ndownturn on future performance.<\/p>\n
As for Arab-Malaysian Merchant Bank, also known as AMMB, the
\nchange in outlook reflects the \"perception that the magnitude of
\nrecent adverse environmental developments will impose stress on
\nAMMB's asset quality.<\/p>\n
\"This concern pertains to the bank's exposure, direct and
\nindirect, to the property and share markets. AMMB's loan exposure
\nto the broad property and finance and business service (including
\ninvestment holding companies) sectors amounted to 44 percent and
\n27 percent of total loans respectively.<\/p>\n
\"Investment holding companies are susceptible to the weaker
\nMalaysian stockmarket, affecting their creditworthiness as
\nborrowers,\" it added.<\/p>\n
Standard and Poor's said it would also meet with the bank's
\nmanagement in the next few months to \"gauge the degree of stress
\nrecent developments are placing on AMMB's performance.\"<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/outlook-negative-for-top-kl-banks-as-economy-slows-1447893297",
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