But impaired loans higher in the third quarter of this year
PETALING JAYA: The local banking sector saw stable loan delinquency by the oil and gas (O&G) sector, but higher impaired loans for the sector in the third quarter of 2017.
According to the Association of Banks in Malaysia (ABM), delinquent loans ratio for the O&G sector fell marginally to 0.1% in the third quarter of this year from 0.2% in the preceding quarter, while impaired loans ratio increased to 5% from 4.5%.
The body, which represents 27 commercial banks operating in Malaysia, attributed the increase in impaired loans ratio to cash flow issues observed in service providers in certain upstream segments.
However, it stressed that risks to the banking system remained limited as exposure to the O&G sector accounted for about 6.5% of total exposures.
Meanwhile, ABM said local commercial banks would remain supportive of the cyclical industry, and would continue to provide access to financing for O&G companies that are viable.
“All O&G cases have been given due consideration by the banks. Credit evaluation is conducted on O&G companies similar to loan applications by any other industries,” ABM said in a statement.
“Feasibility studies such as stress test analyses, due diligence and credit evaluation are conducted as part of the standard assessment procedure to determine eligibility and viability,” it added.
According to ABM, common reasons for loan rejection beyond ineligibility included incomplete loan documentation and inadequate supplementary information required to support banks’ assessment of cash flows and financial buffers of companies.
“The banking industry together with Bank Negara have been engaging with the Malaysian Petroleum Resources Corp to better understand developments in the O&G sector and also to disseminate information on avenues for assistance available for financially distressed companies,” it said.
“Viable corporate borrowers with multiple financial creditors can approach the Corporate Debt Restructuring Committee for assistance to work out feasible and market-driven debt resolutions through mediation,” it added.
ABM noted that viable SMEs that were facing financial difficulties could seek assistance from the small debt resolution scheme. Assistance offered included restructuring or rescheduling of financing facilities and provision of financing to stabilise business cashflow whilst SMEs implement business turnaround plan.