KUALA LUMPUR (April 8): Moody’s Investors Service said in a report today that the asset quality of Malaysia’s largest banks had been more resilient to the coronavirus-induced economic disruption than their peers in Indonesia, the Philippines and Thailand.

This resiliency, along with strong capital and liquidity buffers, will enable Malaysian banks to restore profitability faster than their regional peers, it said in a statement.

Moody’s analyst Li Tengfu said that despite the economic shock triggered by the Covid-19 pandemic, the asset quality of the largest Malaysian banks remains sound, thanks to their greater focus on retail loans that are largely secured, well regulated and supported by ample financial assets.

According to Moody’s, the largest banks in Malaysia have the smallest share of loans under regulatory relief programmes when compared to their regional peers (see chart). Loans under regulatory relief programmes for the largest banks in Malaysia are mostly collateralised mortgages and auto loans, it added.

In contrast, loans covered by regulatory support measures in the other countries are those predominantly exposed to businesses that have taken a direct cash flow hit and do not provide collateral that is as liquid, Moody’s said. 

“This stronger asset quality will help Malaysian banks restore profitability faster than their peers as their relatively lower asset risk will save them the need to keep provisions as high as their peers.

“Moreover, the banks’ capital and liquidity buffers — though not as high as those of their peers — are still strong and enough to cover any potential financial stress,” it said.