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Malaysia’s top banks post record profits, unfazed by property curbs

KUALA LUMPUR: Malaysia’s two biggest banks notched up record annual profits and see further strong growth in the year ahead, confident that a raft of government curbs on the property sector will not have a major impact on overall loan demand.

Malayan Banking Bhd put in its best earnings for a second straight year, with fourth quarter profit jumping 19% on robust loan growth and strength in Islamic banking. CIMB Group Holdings Bhd, reporting earlier in the week, logged a fifth consecutive year of record profit.

The lenders have benefited from a domestic property boom and move to diversify into fast-growing Southeast Asian economies such as Indonesia, Singapore and Thailand.

Robust regional economic growth will continue to work in their favour as will an expansion in business financing expected from a slew of big projects. These include a government-led rail project in Kuala Lumpur and a US$19 billion (RM62 billion) petrochemicals complex in Johor led by state oil firm Petroliam Nasional Bhd.

These factors will offset softer consumer loan growth as the government moves to take some of the froth out of the country’s property market, banking executives said.

“Property in Malaysia has been lagging others in the region, in terms of growth in value. We will focus on more targeted lending,” Maybank Group chief executive officer Abdul Farid Alias told reporters after the bank reported a 16% rise in annual profit to RM6.6 billion.

Both Maybank and CIMB said they expect overall loan growth in Malaysia will slow to 9% to 10% this year from an industry average of 10.6% in 2013.

Providing domestic home loans has been the backbone of Maybank and CIMB’s earnings. But the combination of robust demand and easy credit have prompted Malaysia’s financial authorities, such as those in Singapore and China, to embark on a series of curbs to keep prices in check and head off criticism that the country might be in the midst of a property bubble.

Malaysia has more at stake than some. Soaring demand for mortgages has given it the highest household debt level in Southeast Asia — equal to 86% of gross domestic product.

Lending to households accounts for 57% of outstanding bank loans — a potentially worrying level should the economy come off its current robust growth track.

While these levels have stoked some concern, economists like Nor Zahidi Alias of Malaysia Rating Corp Bhd say long-term prospects for the real estate market are supported by the country’s rather young population.

“And so far, statistics on borrowers’ debt service ability remain stable and household debt is mitigated by household financial assets which are still relatively stable,” he said. — Reuters


This article first appeared in The Edge Financial Daily, on February 28, 2014.


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