SLUGGISH loan growth was a major drag on banks’ performance last year.
But this year, the prospects seem brighter for the banking sector in the country with loan growth expected to pick up pace amid a better economic outlook.
As it stands, the most optimistic projection is for total loans in the banking system to grow by 5.5% in 2018, while the most pessimistic pegs the forecast at 4%.
This compared with a loan growth of 4.1% in 2017, which was a slowdown from 5.3% in the preceding year as Bank Negara statistics show.
The optimists argue that 2018 should see improved loan growth as they expect business loans to accelerate in tandem with higher economic activities. This is particularly so after the 14th general election (GE14), which has to be held by August this year.
Prime Minister Datuk Seri Najib Tun Razak recently hinted that the impending GE14 would be held before July.
Meanwhile, there are some who expect the overall loan growth to remain sluggish this year as consumer loans are expected to ease in tandem with sluggish sales of automobiles and properties in the country.
Be that as it may, the underlying economic trends still favour an improved loan-growth prospect.
That spells good news for most banks in the country.
They are poised to stage a better performance this year compared with 2017 as earnings are expected to improve. The higher interest rate this year is also expected to alleviate pressure on their net interest margin.
The positive economic environment also indicates less stress on asset quality, which is expected to remain stable for most players through 2018.
Despite uncertainties over the new accounting standard MFRS 9, which would come into effect in April, most expect that to have only limited impact on banks’ earnings.
Government in business
GOVERNMENT agencies embarking on business ventures is always a tricky prospect.
On the one hand, there is good reason for it – the agency gets to take advantage of some of its existing assets by commercialising them and using the profits to fund the agencies operations. This in turn would reduce the strain on government coffers.
However, going by some experience in the past in Malaysia, this journey to profits can have disastrous results. Recent examples of these are the cases involving the Federal Land Development Authority (Felda) and Mara Inc Sdn Bhd.
In Felda’s case, the group’s listed unit Felda Global Ventures Holdings Bhd (FGV) has been investigated for a few of its deals, including that of Cambridge Nanosystems Ltd, which produces high-grade carbon nanotubes and grapheme. Ths company has lost at least RM117mil in the last four years. The Malaysian Anti-Corruption Commission (MACC) is also investigating a Felda subsidiary’s purchase of a four-star hotel in the affluent Kensington district of London.
In the case of Mara, the MACC had called up many people in its ongoing investigation into the former’s property purchases in Australia. The case was highlighted after Australian newspaper The Age alleged that a high-ranking Mara official, another senior official and one other person had colluded to overspend government funds in buying a block of apartments in Melbourne.
Hence, it is no surprise that when Deputy Prime Minister Datuk Seri Dr Ahmad Zahid Hamidi officiated at the launch of FRIM Inc, a subsidiary of the Forest Research Institute of Malaysia this week, he advised against deviating from its core business.
He said the management of FRIM Inc should not just consider personal interests by creating multiple investment branches for profit. In particular, Zahid said he does not want to see FRIM Inc putting up or buying hotels abroad. He said he was not making a reference to any particular organisation, but added that things get ugly when “people become greedy for personal interest”.
Sound advice indeed.
Chan’s legacy continues
THE shareholding rumblings in Apex Equity Holdings Bhd appear to be over.
Two weeks ago, the prime mover behind the standalone stock-broking company, Chan Guan Seng, passed away. He, however, appeared to have passed the baton to a new leadership team in September last year, at his own terms.
A seasoned stock broker who had a proven track record of reading market trends well ahead of the pack, Chan resigned from his position as executive chairman of Apex Equity in September last year. It was a position he had held for the last 36 years.
In the last five years, Chan was having problems with some shareholders who wanted to see him out. During the June 2012 shareholders’ meeting, Chan was voted out. But that was only temporary as he was re-appointed to the board two days after his ouster.
With some 20% of equity, Chan managed to hang on to the position and continued to manage the stock-broking company. He finally appeared to have exited on his own terms in September last year.
There were no announcements of Chan disposing his block of shares. The only shareholder that has exited Apex Equity is Endau Suria Sdn Bhd, a privately owned entity that used to control 7.54% of the stock broker.
However, a new shareholder has emerged with a 25% stake – Ace Investment Bank Ltd.
Being a standalone stock-broking company is not easy. The standalone brokerages have lost clients to banks who offer cheaper financing terms. The volume of stocks traded has also dropped.
Under such circumstances, having a shareholder problem is not going to help any stock broker, let alone Apex Equity. Although Chan is no longer with the brokerage, his legacy will continue as a person who managed to survive the worst of downturns and kept a stock-broking company well alive.