Published on 01 Apr 2020.
RAM Ratings’ release of the Banking Scoreboard and Islamic Banking Scoreboard serve as peer comparisons of key Malaysian banks. The former juxtaposes the 16 largest commercial banks in the country while the latter examines how Islamic banks compare against one another. The banks are ranked and assessed based on more than 25 metrics, covering asset quality, profitability, funding and liquidity as well as capitalisation.
The Banking Scoreboard shows that the asset quality of banks remains resilient amidst the weaker macroeconomic backdrop. Public Bank, Hong Leong Bank and Citibank stayed in the top three spots in terms of gross impaired loan (GIL) ratio, with all three banks reporting commendable GIL ratios of less than 1% as at end-September 2019. The former two continued to see prudent and disciplined underwriting standards paying off while the latter benefitted from changes in impaired loan classification policy to be in line with industry norms.
Based on our analysis, banks are well positioned to weather looming asset quality challenges arising from the Covid-19 pandemic and plunging oil prices. The common equity tier-1 (CET-1) capital ratios of all the banks in our sample were above 12% as at end-September 2019. This is significantly higher than the minimum regulatory requirement of 7% and the more stringent capital requirements imposed on those designated as domestic systemically important banks (Maybank and CIMB: 8%; Public Bank: 7.5%).
1. Net impaired loans = Gross impaired loans - Loan impairment allowances
2. A negative net impaired loan ratio indicates that a bank’s loan impairment allowances exceed its gross impaired loans.
On another note, the Islamic Banking Scoreboard indicates that HSBC Amanah, Public Islamic and Hong Leong Islamic reported much higher shares of retail deposits relative to peers, reflective of the banks’ strong consumer focus. Islamic banks belonging to larger banking groups have a greater proportion of retail deposits to total customer deposits when juxtaposed with standalone Islamic banks. Aiding this is the ability of these entities to leverage on the extensive branch networks and other distribution channels of their conventional parents. As part of larger banking groups, the banks are also able to draw on strong parental funding support in the form of restricted profit-sharing investment accounts and interbank funding.
Subscribers can download the full versions of RAM’s Banking Scoreboard and Islamic Banking Scoreboard at www.ram.com.my.
Tan Shu Xuan
(603) 3385 2497
Chow Kah Mun
(603) 3385 2501
(603) 3385 2577
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Established in 1990, RAM Ratings is a leading credit rating agency registered under the Securities Commission’s Guidelines on Registration of Credit Rating Agencies, 2011. In addition to the provision of credit ratings for corporate bonds and sukuk and their issuers, RAM Ratings also provides research and publications on Islamic finance, fixed income and macro-economic and industry analysis as well as data analytics relating to credit risk, counterparty assessments and other related domains.
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