/// Banking and Investment News
Possible Regulatory Ruling Detrimental for
Malaysian Banks
“Those which do not meet
the requirements would
have to increase their CA
(and ultimately credit cost) in
CY14-15 even if their asset
quality is improving.”
New Conditions to Curb
Property Speculation Soon to
Be Imposed
For banks with CA ratio of
above 1.2%, the new ruling
would limit the room for
them to further reduce their
CA ratios, it highlighted.
A possible regulatory ruling
requiring banks to maintain
a minimum collective
assessment (CA) ratio of
1.2% over total loans will
have a negative impact for
banks here.
Industry sources have
indicated that there could
soon be a new regulatory
ruling which requires banks
to maintain a minimum
collective assessment (CA)
inclusive of regulatory
reserve ratio of 1.2% over
total loans (excluding
government loans and net
of individual assessment
provisions) from December
15 onwards.
Analysts at CIMB Investment
Bank Bhd (CIMB Research)
registered surprise should
this be implemented as
domestic banks’ asset quality
have been improving over
the past few years.
“We see this as a potential
prudential measure for
banks to build up their
reserves against any rise in
impaired loans in the future,”
it highlighted in a research
report.
According to CIMB
Research’s calculations, four
banks namely Maybank,
Public Bank, Affin and
Alliance had CA ratios
of below 1.2% at end-of
September 2013.
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“We do not view this as
alarming as most of them,
especially Public Bank, have
strong asset quality.
“Public Bank has a shortfall
because it took the
opportunity to reduce its CA
ratio from 1.5% to 0.7% upon
the full adoption of FRS139
between 2010 to 2012,
supported by its strongest
asset quality.
“Its gross impaired loan
ratio of 0.6% at the end of
September 2013 was less
than half of the industry’s
1.4% and unrivaled by other
local banks.
“Its loan loss coverage
stood at a comfortable
level of 117.3% at the end
of September 2013 versus
97.9% for the industry.”
For Affin and Alliance, CIMB
Research said their CA ratios
were lowered by several
rounds of write-backs in the
past few years.
Nevertheless, itnoted that
they would have to top
up their CA in CY14-15,
potentially leading to a rise
in credit costs even though
the impaired loan ratio is
expected to be stable.
“Based on our estimates, this
could lower banks’ net profits
by between 0.5% (for Hong
Leong Bank) and 11% (Public
Bank) in CY14 to CY15.
www.PropertyHunter.com.my
“Though margin contraction
could be less severe in 2014,
we do not advise investors
to raise their holdings in
banks due to the potential
slowdown in loan growth.
“We expect banks’ asset
quality to be stable but the
potential higher requirement
for CA ratio could lead to a
rise in banks’ credit costs.”
Minister of Urban Wellbeing, Housing and Local
Government, Datuk Abdul Rahman Dahlan
The Ministry of Urban
Wellbeing, Housing
and Local Government
plans to enforce a new
condition to curb property
speculation, said its
Minister Datuk Abdul
Rahman Dahlan.
He said property
developers who intended
to make bulk sales of
more than four units must
obtain prior approval from
the Controller of Housing.
The ministry is talking to
Real Estate and Housing
Developers’ Association
of Malaysia (REHDA) and
expected to announce
the measure in a month’s
time, Abdul Rahman said.
The new enforcement
would be prescribed as a
mandatory requirement in
every advertisement and
sale permit for housing
development, he told
reporters today.
“The government will
continue its various
measures to help the
people own houses,
and weed out unhealthy
speculative activities in the
housing sector,” he said.
The ministry, however,
didn’t plan to undertake
extreme measures to
curb property speculation
because the market
had to work on its own
mechanism, he said.
“It’s a free market. Prices
should be determined by
supply and demand,” he
said.
The minister also said the
government might raise
the budget for MyHome
scheme this year.
“If the project is well
received, we could pump
in more money,” Abdul
Rahman said.
The government recently
announced an allocation
of RM300 million for
the private affordable
ownership housing
programme, to be
launched on April 1.
Under the scheme, the
government will subsidise
first-time buyers, who
earn less than RM3,000 a
month, up to RM30,000 to
purchase low-cost houses.
Qualified applicants can
apply online when more
details are announced
closer to the launch date,
the minister said.