Data-driven report covers latest insights on domestic banking sector, and key trends going forward

Posted Date: September 25, 2019

Malaysian Rating Corporation Berhad (MARC) has published its Banking Sector Insights. The two-part report was produced by MARC’s Financial Institutions portfolio and it provides an overall analysis on the current state of the banking sector and key expectations going forward.

The report comprises two sections, namely an overview of Malaysia’s current banking climate based on year-to-date data, and an analysis of the nine largest commercial banks. For each banking group, MARC analysed seven key rating factors - operating and regulatory environment, franchise strength, risk management, asset quality, profitability, liquidity and funding, as well as capital adequacy.

According to Financial Institutions Portfolio Head Mohd Izazee Ismail, domestic commercial banks have performed well on key fronts, while impaired loans and delinquencies have remained low. Moving forward, the sector should be relatively profitable and remain well-capitalised, factors which will be supported by a still-healthy domestic economy.

Nonetheless, the report also highlights that commercial domestic banks’ ability to grow stronger revenues will be mainly challenged by lower credit growth and net interest margins squeeze due to competitive pressure. Potential areas that may warrant close monitoring are credit risk concerns in relation to the oversupplied high-rise residential, office and shopping complex segments.

Mohd Izazee added, “In view of these challenges, banks will continue to focus on cost efficiency, including through fintech-related investments to digitalise banking services. However, banks would need to manage these investments in a sustainable manner that moderates the impact on their overall financial performance.”

Click here to download the full report.

Beatrice Thio, +603-2717 2946 / beatrice@marc.com.my;
Lalitha Sivanesan, +603-2717 2953 / lalitha@marc.com.my;
Nurfarain Mohd Dom, +603-2717 2925 / farah@marc.com.my