Commercial property glut poses risk for M’sian banks

KUALA LUMPUR (March 12): Banks may face risks on their commercial property loans, as a looming oversupply of office buildings and shopping malls may lead to a correction in valuations, said a Reuters story citing a report by Moody’s dated March 9.

Moody’s, however, qualified this by saying that commercial real estate loans only constituted 3% to 4% of total loans and were likely to remain small, thus keeping potential asset quality issues manageable.

Moreover, their overall asset quality is expected to remain stable as macroeconomic conditions improve and there are fewer new non-performing loans.

Last year, the asset quality of Malaysia’s banks was stable despite a decline in overseas asset performance mainly due to commodity related corporate borrowers.

“Troubles within the oil and gas service sector remained a common driver of overseas loan impairment for RHB Bank, Maybank and CIMB, and is mostly responsible for these banks’ losses booked in Singapore,” said Moody’s.

CIMB Group also suffered high impairment on its corporate exposures in Thailand and Indonesia, it added.

Going forward, Moody’s expects loan growth to recover this year on higher demand for corporate loans and stable consumer lending, while bank profit will be propped up by stable net interest margins.