Six-month moratorium period is good enough

“No, we won’t consider it, as we think that the six-month moratorium period is a good enough period to come up with a plan (to restructure etc). None of us knows how long or how deep the impact from Covid-19 is going to be, ” group CEO Datuk Abdul Farid Alias (pic) said at a virtual press conference after its AGM yesterday.

KUALA LUMPUR: Malayan Banking Bhd (Maybank) does not think there is a need for the loan moratorium to be extended past the September deadline.

“No, we won’t consider it, as we think that the six-month moratorium period is a good enough period to come up with a plan (to restructure etc). None of us knows how long or how deep the impact from Covid-19 is going to be, ” group CEO Datuk Abdul Farid Alias said at a virtual press conference after its AGM yesterday.

“So due to that, we needed the time to digest all the information and we also needed this time to talk to individual customers so that we can work out a plan such as to repackage their facilities so that they can come out from the moratorium in a stronger position. This was the whole intention of a moratorium so that we can face this crisis from a position of strength, ” he added.

Maybank’s chief financial officer Datuk Amirul Feisal Wan Zahir said the bank is expected to face a RM1bil accounting modification loss from this moratorium exercise, which would be recognised in the second quarter.

“Once you change the terms of the financing, it’s really a comparison of what it was before to what the new arrangement is and this is incurred as a day one loss which is a one-off loss, ” he said.

He said another impact of the moratorium was on its cash flows and it did not really impact its profitability.

“What it does is that it takes away liquidity from the banking system because effectively, our customers would not have to pay and therefore we will need more liquidity buffers, ” he said.

“It’s not so much of a cost but it’s more to ensure the banking system remains healthy and vibrant. This is the main impact here, ” Amirul Feisal added.

In Maybank’s virtual presentation to the media earlier, the bank said more than 70% of its loan book in Malaysia was under the moratorium – relief, reschedule and restructure – at the moment.

Rescheduling and restructuring of the loans are also done for the big corporate clients. Abdul Farid said that in Maybank’s books, there has been no change in asset quality as of yet.

“The first-quarter results announcement may not reflect the rest of the year because we have not seen any stress on asset quality for the first quarter of financial year 2020 (FY20). But having said that, the scenario would mostly be the same as far as asset quality is concerned during the moratorium period until end-Sept. We could see some difference after this period which is on Oct 1, the last quarter of the year, ” Abdul Farid said.

Similarly along these lines, Maybank said in its slides that it had engaged 2,350 small and medium enterprises and business banking customers in Singapore and had made available SG$1.2bil of government relief loans.

The bank said that for its Indonesian business, it has engaged almost all its non-retail debtors, including 80 corporates and about 7,700 non-retail customers to assess their business conditions and offer restructuring, wherever needed.

Abdul Farid was encouraged by the mobility index at the moment that showed an increase levels to what it almost was before Covid-19 broke out.

“We all will agree that the economy is a reflection of us individually acting and participating in the economy (to buy and sell). And a large part of it is due to whether we can function as a person and move around. This mobility index... reflects people moving around so economic activity is able to move back to where it was before, ” he said.Maybank said the situation is “quite fluid” in terms of recovery and that there is no guidance yet on key performance indicators moving forward.

“There needs to be a shift in perspective, when growth abounds, asset quality improves then we would be more aggressive in trying to expand profitability and achieve above average growth. But when the cycle turns around, we will hunker down to preserve our capital and liquidity for the sake of us and the entire banking system as well, ” Abdul Farid said.

“To expect any organisation to expand earnings at this point in time is not a realistic expectation. We have to ensure the sustainability of the company and the entire ecosystem first, ” he added.