KUALA LUMPUR: Standard & Poor's Ratings Services has revised its rating outlooks on AmBank (M) Bhd, RHB Bank Bhd and RHB Investment Bank Bhd to stable from negative.
The international ratings agency said on Thursday it had also affirmed the global scale and Asean regional scale ratings on these financial institutions.
“We revised the outlook on the three banks because of our view of moderating economic risk for banks operating in Malaysia, following a prolonged run-up in housing prices and household debt in the country.
“We have revised our economic risk trend for Malaysia's banking sector to stable from negative. The industry risk trend remains stable,” it said.
At the same time, S&P affirmed its rating for four other banks -- Public Bank Bhd
, Malayan Banking Bhd, CIMB Bank Bhd and CIMB Investment Bank Bhd – at stable. It also affirmed the ratings on the outstanding issuances by these banks.
The ratings agency explained its stable outlook on Malaysian banks factored in its expectation that these banks would maintain their satisfactory financial profiles even as the domestic economy slows.
S&P took cognizance that the Malaysian economy has lost some momentum due to a weak energy sector, tighter domestic spending due to the implementation of goods and services tax (GST), and uncertainties in global demand.
“We expect an incremental increase in credit losses from historically low levels. But, overall, we expect the credit risk of Malaysian banks to remain manageable. Malaysian banks have been building up capital and provisioning buffers in the good years, which will mitigate some downside risks.
“We revised the economic risk trend for Malaysia because successive government measures since 2010 to counteract the stimulatory effect of low interest rates on consumer borrowing and home prices have been effective, in our view.
“In particular, the more stringent measures introduced in 2014 to curb property speculation have reined in prices. In our base case, we expect these steps to help keep the year-on-year inflation-adjusted rise in property prices to 4% or less over the next 18-24 months.
“In assessing Malaysia's potential exposure to economic imbalances associated with household debt and the property market, Standard & Poor's has looked for consistent indications that increases in housing prices and consumer debt are moderating.
“In our view, the impact of recent government and regulatory policy initiatives will curtail potential systemic risk arising from the household sector. In addition, we expect the unemployment rate to remain slow and policy rates to remain stable, which would support the debt repayment ability of the household sector,” S&P said.
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