Leong Yam Meng
PETALING JAYA: Although the sale of non-performing loans (NPLs) by banks in the country is rare, it is an area to closely watch for as loan moratoriums draw to an end, according to debt management firm Collectius.
Collectius Malaysia managing director Leong Yam Meng told StarBiz he believes NPL sales is a space to watch for with loan moratoriums coming to an end, as banks will start to have a clearer picture on their NPL positions in the coming months.
The company recently concluded the first NPL transaction involving a bank in Malaysia this year, and the first in the market since CIMB Group
Holdings Bhd sold a portion of its NPLs in 2020.
The process, which was endorsed by Bank Negara, involved a global bank in Malaysia selling a portfolio of NPLs to Collectius.
On the sale of NPLs by banks, Leong said: “Albeit rare, we have seen several Malaysian banks prior to the Covid-19 pandemic such as CIMB Group Holdings Bhd, the country’s second-largest banking group, selling a small portion of its NPLs in 2020.
“Other than that, in 2019, AMMB Holdings Bhd sold NPLs from its two subsidiaries, AmBank (M) Bhd and AmBank Islamic Bhd, to Aiqon Capital Group Sdn Bhd at a value of RM553.91mil.
Leong added that on the whole, the sale of NPLs has historically been rare in Malaysia and is a tightly controlled process requiring approvals from Bank Negara.
“However, the acquisition of NPL we recently made from a global bank on a secured portfolio was the first one to be conducted this year, and was endorsed by the central bank.”
As to whether the company is in discussion with other banks in Malaysia to buy NPLs, he said Collectius is always in touch with banks and discussions are ongoing but closing a debt sales deal may take eight months to a year.
Compared to last year, he said there are fewer banks in discussion to sell their NPLs as they are not in a rush and are monitoring the global economic situation closely.
However, he said the company foresees the closure of a deal by the fourth quarter of this year or in the first quarter of 2023.
Global banks, he said, are also undertaking mergers and acquisitions (M&As) which may lead to the disposal of NPL accounts that are long overdue.
Local telecommunication giants too have started M&As and this show how large companies are consolidating their presence to increase competitiveness, he noted.
While NPLs at telcos may not be as high as banks in terms of ticket size, he said there is a possibility of them also disposing of bad debt accounts to clear their books.
Leong added that on the whole, the sale of NPLs has historically been rare in Malaysia and is a tightly controlled process requiring approvals from Bank Negara.
“However with the release of the Financial Sector Blueprint 2022-2026, the central bank is seeking to remove the existing foreign equity limit requirement for buyers to attract more established international players to enter the market.
“This would mean an increased capacity within the market to absorb NPLs, which is timely given the uncertain macro outlook we have now,” he noted.
On the particular sectors in Malaysia that Collectius foresees more upcoming NPL sales, Leong said consumer banks would be the leading sector.
He said the automotive industry is another sector due to the growing number of car brands issuing loans which could be viewed as potential NPL sellers.
Furthermore, he said with loan options growing and individuals turning away from banks towards other alternatives, the “Buy Now Pay Later” (BNPL) segment is also an area where Collectius could add value in terms of buying NPLs.
“With BNPL rising in popularity, it is likely that this segment will start conducting the sale of NPLs in time to come,” Leong said.
On the fabric of the domestic debt market and why it is different to what it was five years ago, he said people are borrowing not just from banks but in many other places.
He said the acceleration of digitalisation has introduced a host of platforms by BNPL players, telcos, automotive companies offering direct credit and peer-to-peer lending options to consumers.
In that regard, he said Malaysians have more avenues for loans on discretionary expenses and given the lower penalties faced for defaulting on these loans, more loan delinquencies could be expected.
According to the Finance Ministry’s Economic Outlook 2022 report, during Jan-July 2021, loan approvals for household borrowings from the banking system expanded by 41.6% to RM126.9bil while loan disbursements rose by 10.5% to RM184.7bil, significantly for consumption credits (11.4%), purchases of residential properties (5.5%) and passenger cars (2.7%).
Collectius is a debt management firm and a leading restructuring partner for financial institutions in Asia.
It has operations in the Philippines, Malaysia, Thailand, Indonesia, Singapore, Vietnam and more recently, India, serving about five million customers.
