Lower loans growth tipped for Malaysia

Malayan Banking Bhd (Maybank), the country’s largest banking group by assets, is looking at a loans growth of about 9 per cent, while CIMB Group Holdings Bhd is forecasting a loans growth of 10 per cent after having grown 12.8 per cent last year.
Maybank chalked up a loans growth of 12 per cent last year.
CIMB group chief executive Tengku Datuk Seri Zafrul Aziz said while the bank would continue to see challenges, it would nevertheless continue to grow and improve its performance, albeit at a slower pace.
“We are facing challenging times,” he said at a press conference held to announce the bank’s full-year results for the financial year ended December 2015.
Maybank president and chief executive Datuk Abdul Farid Alias said the group would see slower overall growth from the corporate segment because several sectors were recording lower profits and having fewer investment activities.
Abdul Farid said the group’s Singapore loans growth was expected to be about 4 per cent after 6 per cent growth in FY15 due to slower regional and domestic economic growth.
The CEO said asset quality may continue to rise if the credit cycle turned and the weakness in the oil and gas sector persisted.
Maybank is, however, targeting a higher loans growth from its Malaysian operations about 7 per cent this year after growth of 5.3 pre cent last year, driven by the consumer sector and public infrastructure projects such as the MRT and the LRT.
Maybank’s Malaysian operations made up about 56 per cent of the bank’s loan portfolio last year.
Abdul Farid said Maybank was targeting deposits growth of about 11 per cent this year after posting a rise of 12.8 per cent in FY15.
“Asset quality remains a concern because of the volatility that we see in the market, whether from the foreign exchange or from the interest rate hike by the US Federal Reserve. We want to make sure that our balance sheet remains strong and we preserve asset quality,” Abdul Farid said.
Maybank’s net impaired loans ratio climbed to 1.38 per cent as of December 31, the highest in at least two years.
Maybank chief financial officer Datuk Mohamed Rafique Merican said the increased impaired loans came from several overseas corporate clients in Indonesia and China and one Malaysian account.
“Asset quality from the consumer and SME [small and medium-sized enterprise] segments are still good and improving, but the corporate side is more challenging,” Abdul Farid said. When asked if the bank sees its NIM ratio moving higher, Abdul Farid said: “You are right to think that the current economic volatility would increase the stress on customers. But what we see is that the stress would be on certain individuals only.”
CIMB Group also predicts further compression of net interest margins (NIM) in the current year amidst a soft economic environment.