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Shot in the arm in third quarter

Oct 28, 2020
Shot in the arm in third quarter
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PETALING JAYA: In a stock market rife with uncertainty, the upcoming third quarter earnings season could be the much-needed shot in the arm to improve investor sentiment.

While sentiment on Bursa Malaysia may remain cautious amid political uncertainties ahead of Budget 2021, UOB Kay Hian Malaysia Research expects stocks to rebound as investors’ focus shifts towards the results season.

 

“We expect the upcoming reporting season to form a key market re-rating catalyst, as key glove manufacturers (particularly Top Glove Corp Bhd) are on course to report stratospheric earnings, and should also guide for loftier profits in the subsequent quarter.

“Ample global and domestic financial liquidity, coupled with an expected protracted period of a globally ultra-low interest rate environment, will continue to support relatively high equity valuations, ” stated the research house.
Speaking with StarBiz, MIDF head of research Imran Yassin Md Yusof (pic below) expects corporate Malaysia to enjoy better earnings generally in the third quarter of 2020 – on a sequential basis.

This is due to the fact that Malaysia has witnessed a resumption in economic activities, unlike in the April-June 2020 period where the operations of most businesses were terribly impacted due to the movement control order (MCO).

“However, we do not expect it (earnings season) to be at pre-Covid-19 level, given that recovery is gradual.

“We also expect the stimulus measures implemented by the government such as the Penjana stimulus package will provide a solid support in general, ” he said.

Imran added that the healthcare sector, which includes glove makers, would continue to outperform other sectors in the third quarter.

“Our expectation is based on the fact that demand for their products remains strong and margins continue to expand, ” he said.

The banking sector, however, is expected to underperform despite the sector’s improvement in earnings as compared to the second quarter of 2020.

“This is due to the expectation that provisions will remain high. Furthermore, there seems to be a lack of visibility of the asset quality of banks after the ending of the loan moratorium, ” according to Imran.

Echoing a similar view, fund manager Danny Wong also believes the third quarter earnings season will be better compared to the second quarter.

However, in a year-on-year comparison, he said many sectors would continue to see dampened earnings performance.

“On the quarter-on-quarter basis, there will be two extremes. On one extreme, there will be sectors whose earnings remain bad or turn from bad to worse. These include companies in the tourism and hospitality sectors.

“On the other extreme, you would see companies that continue to record good or even better earnings growth. Examples would be those in the glove manufacturing and technology sectors, ” said Wong, who is the chief executive officer of Areca Capital.

As for other sectors such as construction and property development, he described the earnings growth as “likely to be neutral”, despite some signs of business improvement from the second quarter.

“If investors are able to hold for one or two years and wait for the business fundamentals to gradually improve, they can surely consider stocks in the sectors that now appear to have a neutral outlook, ” he said.

Looking ahead to the fourth quarter earnings season, Wong said the technology and glove sectors would likely continue to lead the market in terms of earnings performance in the fourth quarter of 2020.

Meanwhile, MIDF Research’s Imran foresees the positive momentum of corporate earnings to continue, as long the economic recovery remains intact.

“However, we recognise that there is a downside risk to this such as the resurgence of the Covid-19, which has led to conditional MCO (CMCO) being implemented in the Klang Valley.

“Nevertheless, for now, we believe the economic impact of the CMCO is limited, given that it is less restrictive than the targeted enhanced movement control order or TEMCO.”

Bank Islam extends targeted repayment assistance to June 30, 2021

Oct 26, 2020
Bank Islam extends targeted repayment assistance to June 30, 2021
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KUALA LUMPUR: Bank Islam Malaysia Bhd has extended its targeted repayment assistance to those who have lost their employment or reduced monthly income until June 30 next year.

The bank also provides rescheduling and restructuring options for customers not impacted by the loss of jobs or facing reduced monthly income but need to re-strategise their finances.

Bank Islam said it was committed to assist customers in navigating through current trying times, particularly following the recent spike in Covid-19 positive cases nationwide.

Chief executive officer Mohd Muazzam Mohamed said the bank had been consistently approaching its business banking customers who need a more customised plan in servicing their financing since the beginning of the automatic moratorium in April this year.

He said to date, the bank's approval rate for business banking customers' remained at almost 100 per cent.

The bank has also approved 100 per cent application from its retail customers, of which 43 per cent were approved under a further three-month deferment plan and the remaining 57 per cent approved under a six-month instalment reduction plan.

''The bank is also actively engaging with our affected customers who have yet to submit the required supporting documents for their targeted repayment assistance application. We have also simplified the process to help those in need.

''We are aware that there are customers who may continue to experience cash flow pressures amid the pandemic and need further support in managing their finances. Bank Islam is always open to discuss and provide our best financial solution offerings in assisting them to overcome these difficulties,'' he said in a statement today.

Mohd Muazzam said the bank was proactively reaching out to potentially vulnerable customers, especially in the sectors heavily impacted by Covid-19.

''They include those working in the tourism, hospitality and airline sectors. It is part of our responsibility to help them manage their financial obligations as they strengthen their finances.

''Even though the six-month automatic moratorium period has ended at the end of September 2020, Bank Islam continues to assess applications from affected customers who require repayment assistance,'' he said.

As of today, 98 per cent of Bank Islam's customers have resumed servicing their financing commitment after September.

The bank said the repayments ensure that more liquidity and resources would be available for it to continue providing aid to other individuals and businesses.

 

Bursa Malaysia publicly reprimands FSBM Holdings, six of its directors and fines the six

Oct 23, 2020
Bursa Malaysia publicly reprimands FSBM Holdings, six of its directors and fines the six
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PETALING JAYA: Bursa Malaysia Securities Bhd has publicly reprimanded FSBM Holdings Bhd and six of its directors for failing to issue the company’s annual report for the financial year ended June 20, 2018 (AR 2018) on time and has imposed fines totalling RM375,600 on the six directors.

FSBM was publicly reprimanded for failing to issue its annual report that included the annual audited financial statements together with the auditors’ and directors’ reports on or before Oct 31, 2018. FSBM had only issued the AR 2018 on Dec 31, 2019, after a delay of 14 months.

According a statement by Bursa, the delay in issuance of the AR 2018 was mainly due to the disagreement with the external auditors in issuing a disclaimer opinion for the audited financial statements 2018, which would have resulted in the company triggering the prescribed criteria under paragraph 2.1(d) of Practice Note 17.

“The external auditors had on Oct 31, 2018 issued the disclaimer on the basis that they were unable to obtain sufficient appropriate audit evidence to satisfy themselves as to the appropriateness of the carrying amounts of the trade and other receivables due from Technitium Sdn Bhd of RM7.6 million and a business consultant of RM3.2 million in accordance with the Malaysian Financial Reporting Standards and whether any adjustments to these amounts were necessary.”

FSBM was also required to review and ensure the adequacy and effectiveness of its financial reporting function. In addition, FSBM must ensure all its directors and relevant personnel attend a training programme in relation to compliance with the requirements pertaining to financial statements.

“Bursa Malaysia Securities views the contravention seriously as the timely submission of financial statements is one of the fundamental obligations of listed companies and is of paramount importance in ensuring a fair and orderly market for securities traded on Bursa Malaysia Securities and necessary to aid informed investment decisions,“ the regulator said.

Star Exclusive - Tax stimulus needed in budget

Oct 22, 2020
Star Exclusive - Tax stimulus needed in budget
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PETALING JAYA: With the domestic economic recovery still fragile despite signs of green shoots, there is a growing need for additional stimulus measures to spur consumption and business sentiment.

To meet the need, economists have called for a reduction in taxes and other forms of tax stimulus measures to be incorporated in the upcoming Budget 2021.

 

While the government has introduced five rounds of stimulus packages totalling RM305bil, on top of Bank Negara’s move to lower the overnight policy rate to induce borrowings, experts feel more can be done by the government despite concerns of limited fiscal space.

Speaking with StarBiz, Socio-Economic Research Centre (SERC) executive director Lee Heng Guie (pic below) said Budget 2021 should introduce “measured tax stimulus”, given the uneven economic and business recovery pace.

This is important as Malaysia is currently into the third wave of the Covid-19 pandemic that will further undermine consumer sentiment and business confidence.

 

Lee suggested a tax holiday for individuals with an annual chargeable income bracket of RM100,000 to RM150,000.

He also said the government could consider a reduction in the personal income tax rate and selected personal tax relief for middle-income wage earners and below.

In addition, a sales tax reduction or exemptions for big-ticket items and consumer durables to encourage consumer spending could be considered.

As for businesses, especially the small and medium enterprises (SMEs), Lee said there needs to be tax incentives, financial relief and assistance to ease the 3Cs – cash flow, cost and credit.

“These include an extension of the wage subsidy programme, electricity tariff discounts, the exemption of foreign workers’ levy as well as the extension of rental rebates.

“For SMEs, the income tax rate for chargeable income up to the first RM600,000 should be reduced by 1%-2% to 15%-16% from the 17% currently, ” he said.

While these tax measures may result in lower tax revenue for the government in the short term, Lee believes the resulting economic and business revival will lead to increased revenue for the government in due course.

Sunway University professor of economics Yeah Kim Leng, (pic below) however, felt the government was unlikely to introduce tax cuts, given the country’s expected revenue shortfall and continuing fiscal deficit position.

“A taxation tweak, however, is possible to reduce the tax burden of the middle 40% population (M40) by widening the income tax brackets. The current high tax rate of 24% is quickly reached for those who earn RM100,000 and above.

“Widening the tax bracket will enhance the disposable income of the lower middle-income households.

“Last year, the tax rate on those earning above RM2mil was increased from 28% to 30%. We may yet again see the top 20% (T20) group being called upon to shoulder an additional tax burden, ” he told StarBiz.

Asked if the government should consider imposing a windfall tax on glove makers to raise more tax revenue, Yeah said such a move would have undesirable consequences.

These include deterring the firms from capital investment and business diversification and engaging in unproductive tax avoidance activities.

“It also raises an equity issue since the firms are already being taxed as they could argue for symmetrical fiscal support when the industry is in the doldrums, ” he said.

For context, glove makers have recorded Astronomical growth in net profits following the Covid-19 outbreak, thanks to the sharp surge in glove demand.

This has sparked speculation that the government may impose a windfall tax to partially offset the drop in oil- and tax-related revenue.

Analysts expect the glove manufacturing industry to continue enjoying strong bottomline growth in 2021 and even in 2022, if the development of the coronavirus vaccine drags on.

The long-term impact of a windfall tax could be counter-productive

RHB Research Institute had said earlier that chances were low for the windfall tax.

It pointed out that up to mid-October, there had been no consultations between the authorities and industry representatives to discuss the implementation of such a tax.

“The rubber glove industry has been paying corporate taxes and foreign worker levies to the government.

“In line with the higher profits within this sector, we estimate that the tax paid to the government should be at least triple the amount paid during pre-Covid-19 times.

“Lastly, imposing a windfall tax may be counter-productive, as it could encourage local glove makers to adjust their future expansion plans overseas to countries like Thailand and China, ” it said in a report dated Oct 19.

On the contrary, SERC’s Lee did not discount the possibility of a windfall levy on the rubber glove sector.

While the move could be seen as a revenue stabiliser in times of fiscal stress, Lee cautioned that the long-term impact could be counter-productive.

“Proponents would argue that the windfall tax penalises companies that are already paying large amounts of tax and planning to invest billions in the expansion of plant capacity.

“It would sour Malaysia’s investment climate in a global race for resource-based investments.

“The timing of introducing new taxes and the sequencing of tax reforms must be implemented in line with the state of economic and business conditions, ” he said.

According to Lee, the Windfall Profit Levy Act 1998 allows the government to slap a windfall tax on businesses enjoying excessive or supernormal profits to help plug the tax revenue gap and keep a manageable fiscal deficit.

“The windfall taxes were imposed on the plantation sector during the 1997-1998 Asian Financial Crisis due to the substantial gains brought about by the sharp depreciation of the ringgit.

“During the 2008-2009 Global Financial Crisis, a 30% windfall profit levy on independent power producers was structured on a return on assets in excess of 9%, ” he noted.

Despite the concerns on low tax collections, RHB Research Institute pointed out that the government would benefit from the digital tax and the higher sin taxes on cigarettes and alcoholic beverages.

“The digital tax is expected to rake in about RM300mil this year. While this is positive for the government’s coffers, it is well below the RM2bil to RM4bil previously estimated by the market.

“Nevertheless, we expect the digital tax collection to grow by 9% this year, given the strong and steady growth of Malaysia’s digital economy, ” it said.

The research house added that sin tax collections could be higher, given that the authorities’ focus is tilted towards curbing the sizeable shadow economy.

“The government has proposed stronger penalties on illegal gambling activities, which could lead to higher collections through returning legal gambling market share, ” it said.

Recovery in 2021 can counter gloom in banking

Oct 21, 2020
Recovery in 2021 can counter gloom in banking
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PETALING JAYA: A possible spike in banks’ bad loans in the first half of 2021 is keeping investors sceptical on banking stocks.

This was a key concern raised during CGS-CIMB Research’s roadshow from Oct 7-9 involving 46 participants from 13 asset management companies.

 

“We sensed that the main reason why investors have not increased their holdings in banks is their concern over a possible rise in gross impaired loan (GIL) ratio in the first half of 2021 following the end of the targeted loan moratorium.

“However, we think an economic recovery in 2021 – our economist projects gross domestic product growth of 7.5% – would help to limit any increase in the GIL ratio, as this could lower the unemployment rate and improve business revenue, ” the research house stated in a note.

CGS-CIMB Research forecasts the banking industry’s GIL ratio to increase from 1.4% as at end-Aug 2020 to 1.7% by end-2020 and 2% by end-2021.

Market respite

Oct 20, 2020
Market respite
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PETALING JAYA: As the United States races against time to launch a new economic stimulus ahead of the Nov 3 presidential poll, global stock markets, including Bursa Malaysia, are basking in improved investor optimism.

A statement by House of Representatives speaker Nancy Pelosi that a stimulus deal must be finalised by tomorrow has helped to ease market jitters that were worsened by the surging Covid-19 cases in Europe and most US states.

 

On the domestic front, the FBM KLCI rose by 14.27 points or 0.95% to 1,518.11 yesterday.

This compares with the 26.6 points decline last week witnessed by the 30-stock index on a week-on-week basis.

Although the week has begun on a positive note, experts remained cautious on Bursa Malaysia’s outlook.

According to a bank-backed brokerage, the FBM KLCI is affected by downside bias amid spiking Covid-19 cases and domestic political tussles.

The brokerage said the FBM KLCI’s near term outlook has turned negative, unless it stages a swift retake above the 50-day simple moving average resistance level near 1,530 points.

In the event the index fails to make the swift retake, it could be potentially “reignite another selloff towards the 1,488,1, 474 and 1,461 territory”.

Sector-wise, major beneficiaries from the ongoing second wave of Covid-19 in Malaysia are gloves, technology, telecommunications and courier while sectors most vulnerable appear to be aviation, retail, food and beverages, gaming, malls and hotels, ” the brokerage said in a note.

According to Kenanga Research senior analyst Goh Yin Foo, the FBM KLCI faces a downward bias, pointing out that there is a dearth of fresh catalysts for the stock market.

Goh said the tug-of-war between the bulls and the bears dragged on and this would likely result in the FBM KLCI trading range-bound for the time being.

“For the week ahead, investors will still be monitoring the local Covid-19 situation and political scene for possible stock market implications, ” said Goh.

Meanwhile, TA Securities Research said the FBM KLCI was bogged down by renewed bearish momentum flashed by technical indicators.

Following the 26.6 points drop last week, the index is expected to extend its downward correction this week.

“Domestic political uncertainties, resurgent Covid-19 infections and fresh lockdown measures in multiple districts and areas in Selangor, Klang Valley and other states are the main factors dampening market sentiment.

“Nonetheless, the bright spot should continue to be the healthcare sector, with rubber gloves, personal protective equipment and vaccine-related stocks likely to benefit from a protracted virus pandemic to attract strong bargain hunting interest.

“Defensive banking, gaming, and utility related stocks such as AMMB Holdings BhdCIMB Group Holdings Bhd, RHB Bank Bhd, Axiata Group BhdDigi.com BhdGenting BhdGenting Malaysia Bhd and Tenaga Nasional Bhd should continue to attract bargain hunters, ” it said in a note.
 

On top of the market uncertainties, Bursa Malaysia was affected by the continued outflow of foreign funds.

In the Oct 12-16 week, net selling by foreigners widened to RM237.09mil compared with RM28.38mil outflow in the preceding week, MIDF said in its weekly fund flow report.

Cumulatively for October, foreign investors were net sellers to the tune of RM809.38mil. Year-to-date up to Oct 16, foreign net selling has reached RM22.59bil worth of equities on Bursa Malaysia.

Last week, MIDF Research pointed out that retailers were net buyers of RM133.15mil worth of equities, with local institutions at RM103.96mil net during the same period.

This marked the fourth consecutive weeks of local institutions as net buyers on Bursa Malaysia.

MIDF Research noted that after three consecutive weeks as net sellers, last week saw retailers as net buyers.

“This is a potential signal for the return of buying appetite for retailers with bargain hunting activities, renewed interest in glove stocks with the surge in Covid-19 cases and some political uncertainty subsided, ” according to the research house.


The week ahead - Trade data, CPI, GDP,

Oct 19, 2020
The week ahead - Trade data, CPI, GDP,
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CPI, corporate earnings

AFTER a dip in headline inflation in August, the September Consumer Price Index (CPI) numbers will be watched closely. The Statistics Department is expected to release the CPI on Wednesday.

 

The CPI for August fell 1.4% to 120.1 from 121.8 a year ago, mainly due to lower transport and fuel prices but food prices continued to increase.

In monthly terms, however, the August CPI reading increased 0.2% from July, according to the department. Year-to-date, the CPI reading for January to August 2020 decreased 1% when compared to the same period a year ago.

Meanwhile, Bank Negara will also be releasing its international reserves figures as at Oct 15 on Thursday.

The international reserves of Bank Negara amounted to US$105bil as at Sept 30. The reserves position is sufficient to finance 8.4 months of retained imports and is 1.1 times total short-term external debt.

A slew of corporate earnings are expected to be announced this week including by Axis Real Estate Investment Trust and Pavilion Real Estate Investment Trust.

China 3Q GDP

CHINA’S gross domestic product (GDP) will be out today together with September data on industrial production, retail sales and fixed-asset investment. China will also announce its October loan prime rates (LPR) fixing on Tuesday.

China’s economic growth is expected to have accelerated in the third quarter (Q3), with IHS Markit projecting the GDP to have expanded at a 5.9% annual rate.

ING Asia senior economist Prakash Sakpal opined that China’s Q3 GDP performance should be better than that of Q2, imparting upside risk to the house forecast of 2.5% year-on-year GDP growth in the last quarter (3.2% in Q2).

ING does not see any reason for the People’s Bank of China (PBoC) to alter the current monetary policy setting.

UOB Global Economics and Markets Research expects a growth of 4.9% year-on-year while Bloomberg consensus forecast for Q3 GDP is at 5.5% year-on-year.

Additionally, UOB expects the PBoC to continue to hold rates into 2021.

Trade data

TRADE data is due in Japan, Taiwan and Thailand this week.

IHS Markit said Taiwan’s export orders and Thailand’s trade figures will be closely scrutinised for clues into global trade performance.

This followed global PMI data indicating a revival of global goods trade during September.

ING said taking a cue from firmer exports elsewhere in the region and look for the same in Japan and Thailand, though their export growths are yet to turn the corner into positive territory.

It added that Taiwan’s export orders would be a key indicator of electronics-led recovery coming into the final quarter of the year.

 

Maybank introduces first ever social impact deposit

Oct 16, 2020
Maybank introduces first ever social impact deposit
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KUALA LUMPUR: Maybank Islamic Bhd today introduced Malaysia's first ever social impact deposit, a campaign under its Islamic fixed deposit account (IFD-i).

Under the campaign, customers are offered to place a fixed deposit and help in extending financial relief to those whose incomes have been affected by the Covid-19 pandemic.

The bank said members of the public can participate in this social cause by making a minimum placement of RM1,000 into an IFD-i account for six months.

While customers will receive the prevailing board rate for their deposits, Maybank Islamic will separately contribute 0.3 per cent per annum to a special account, which is the Social Impact Assistance Account, for every deposit placement made during the offer period.

This special account is designated to provide support to beneficiaries comprising Maybank Islamic customers identified and assessed by the bank to be in dire need of financial

assistance due to a loss of income or employment as a result of the pandemic.

Maybank Islamic chief executive officer Datuk Mohamed Rafique Merican said this initiative is in line with Maybank's ongoing efforts to provide assistance to its customers who are impacted by the Covid-19 pandemic.

''The impact of the virus has been devastating for so many and we believe that we are in a unique position to assist those who are still rebuilding their lives at this time.

''Hence, we have come up with this initiative to enable members of the community who also share the same sentiments to join hands with us,'' said Mohamed Rafique.

He said the social impact deposit is very much aligned with the Maybank group's sustainability agenda and commitment to embedding good environmental, social, and governance (ESG) practices within its operations and deliver meaningful solutions to the community.

''Given our mission is to humanise financial services, we constantly challenge ourselves to see how we can also make a positive impact on the community and environment through

our products and services.

''The social impact deposit initiative provides us an avenue to do so, and work with like-minded people to help our fellow citizens navigate this crisis together,'' he said.

According to Maybank, the social impact deposit offer period will be from October 15 to December 31, 2020 and customers can make their placements via Maybank2u or at any Maybank or Maybank Islamic branches in Malaysia.

The bank said this initiative is one of the many Maybank has introduced to support the community in these trying times.

''Other campaigns include the Mercy Malaysia Covid-19 Fund, the People's Campaign via crowdfunding platform MaybankHeart to provide support in collaboration with non-government organisations (NGO) who assist Malaysia's most at-risk communities, and supporting the Maybank Women Eco-Weavers, who during the pandemic have produced sustainable and reasonably-priced face masks for their communities,'' it added.

 

Banks equipped to deal with defaults

Oct 15, 2020
Banks equipped to deal with defaults
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KUALA LUMPUR: Banks in the country will remain resilient despite expected increase in impairments where firms in vulnerable sectors could default in their payments, Bank Negara has affirmed.

The central bank ran a stress test, under an assumed scenario of economic and financial shocks due to the pandemic, and found that overall impairments are projected to rise above 4% of loans by end-2021.

 

In its “Financial Stability Review – First Half 2020” report issued yesterday, Bank Negara said the test takes into account the effects of the blanket moratorium implemented in April and the subsequent targeted repayment assistance announced by banks in August.

Business impairments are expected to be driven by defaults of maturing bullet repayments of firms operating in vulnerable sectors, mostly in the services industry which is expected to experience a slower recovery, as well as exposures to several large borrower groups with weaker financials.

Meanwhile, household loan impairments are projected to double, from what are already historically low levels.

Higher household impairments are expected to emerge in the second half of 2021, when the extended repayment assistance programmes, that will remain through the first quarter of 2021 for individuals with a loss in income, ends.

“Overall, credit costs to banks could rise to RM29bil (1.4% of total loans) over 2020 and 2021.

“These projections assume conservative estimates of the share of loans under bespoke targeted repayment assistance (mainly for businesses) based on restructuring and rescheduling trends observed at the onset of the pandemic.

“With uncertain conditions persisting, banks have been much more proactive in extending repayment assistance, as seen in recent months. This was not taken into account in the simulations, ” it said.

Bank Negara said that since July, the number of businesses receiving repayment assistance from banks has increased seven-fold.

This would improve debt serviceability and mitigate credit losses.

It also pointed out that in anticipation of higher credit losses, banks have been shoring up their buffers, adding RM2.7bil to provisions in the first half of 2020.

“At an individual bank level, additional provisions by banks have already risen to an average of 16% of banks’ projected stressed credit losses over a 12-month horizon, based on their internal stress tests.”

It said the provisions could increase as banks get a better view of credit developments, with assessments done after the end of the blanket moratorium.

“The gradual build-up of provisions will also ensure that banks maintain healthy buffers to absorb losses and support continued lending to the economy, ” the central bank pointed out.

The impact of stressed credit losses on banks’ solvency would result in the aggregate total capital ratio (TCR) and common equity Tier-1 (CET1) capital ratio declining by two percentage points (ppts) and 1.4 ppts, respectively, over the next 12 to 18 months.

Under the bottom-up scenario analysis, the aggregate TCR and CET1 capital ratio as reported by commercial and Islamic banks are projected to decline by a larger extent of 3.4 ppts and 3.1 ppts, respectively.

Bank Negara said that by applying a sensitivity analysis to these results, individual banks are projected to have adequate buffers above the regulatory minimum capital requirement to withstand further losses associated with default rates that are eight times higher than the banks’ historical default rates.

These multiples are significantly more severe than Malaysia’s worst experience so far – the Asian Financial Crisis – when overall impairments rose by three to five times.

 

 


Still a struggle for bottom 20%

Oct 14, 2020
Still a struggle for bottom 20%
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KUALA LUMPUR: The top 10% of households (T10) commanded 30.7% of total income in 2019, while the income share of the bottom 20% of households (B20) was only 5.9%, according to a Khazanah Research Institute (KRI) report.

The report, titled “Welfare in Malaysia Across Three Decades, ” also noted the wide variation of savings from household income between income groups.

 

The top 10% of households had gross savings of RM12,653 per month on average, while the bottom 10% had only RM200 per month on average.

On a net basis, some households might have negative monthly residual income as the amount in gross term was before the deduction of obligatory payments such as social security contributions and inter-household transfers.
The report pointed out that many households remain precariously vulnerable, although the absolute poverty rate had declined to 5.6% (405,000 households) in 2019 from 7.6% in 2016. However, there has been little progress in reducing relative poverty, with an incidence of 16.9% (1.2 million households).
 

This meant that 11.3% (835,000 households) had incomes not far above the absolute poverty line income while remaining far below the average living standard.

These households are vulnerable to falling back into absolute poverty in case of catastrophic events such as the Covid-19 pandemic or a job loss. Also, the increase in household income has been accompanied by higher spending on eating out and communication-related goods and services.

These items, long seen as discretionary, have increasingly become necessary and put further pressure on the cost of living.

In recent years, household income growth has also slowed in tandem with the country’s slowing economic growth.

The report also noted that there was some convergence in average household incomes between ethnic groups and states over the last three decades.

However, gaps remain, as the convergence was driven by increased cash transfers and self-employment income, rather than wage growth.The long-term trend in income inequality, as measured by the Gini coefficient, also moderated from 0.442 in 1989 to 0.407 in 2019.

Bumiputra income growth has been faster than other ethnic groups, leading to smaller ethnic gaps. However, bumiputra economic activities remained less diversified and narrower than that of the non-bumiputra.

The report also pointed out the broad progress achieved in the country over three decades, with average real household income in Malaysia more than tripled from RM2,580 in 1989 to RM7,901 in 2019, while median income rose from RM1,801 to RM5,873.

Household income, as a share of gross domestic product (GDP), increased to 45.7% in 2019 from 35.9% in 1989.

The absolute poverty rate fell during the three decades from 16.5% in 1989 to 5.6% in 2019. KRI said its findings underscored the critical and urgent need to transform the Malaysian economy to elevate the collective welfare and incomes of households.

It suggested creating more high paying jobs in higher value-added activities, scaling up economic empowerment initiatives to assist low-income and vulnerable households, and increasing welfare spending and broadening the social protection system to include more vulnerable households.

KRI chairman Tan Sri Nor Mohamed Yakcop (pic) spoke about “a sense of decency” in the country and how this had reduced inequalities in society since independence in 1957.

“Based on this value, we built schools and hospitals, especially in rural areas, as well as boarding schools to enable children from the villages to emerge from poverty and join the professional class.

“We succeeded in increasing the number of bumiputra professionals from only 107 individuals in 1970 to 43,367 in 2016, ” he said in his speech before the online presentation of the KRI report to the media yesterday.

Nor Mohamed said that in addressing different forms of deprivation, the country should strive towards achieving decent rather than minimum living standards.

“For example, a single mother with two children who has to work two jobs. Her income may be higher than the poverty line, but she cannot give the best attention to her children.”

Banks ready to help customers in CMCO, EMCO areas

Oct 13, 2020
Banks ready to help customers in CMCO, EMCO areas
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KUALA LUMPUR: Banking institutions are ready to assist borrowers/customers in areas which are under conditional Movement Control Order (CMCO) or enhanced MCO (EMCO).

“Borrowers/customers in these areas who face difficulties in making loan/financing repayments should immediately contact their banks to request for repayment assistance, ” the Association of Banks in Malaysia (ABM) and Association of Islamic Banking and Financial Institutions Malaysia (AIBIM) said in a statement.

 

They said banks are ready to facilitate requests for repayment assistance to suit borrowers'/customers’ financial circumstances.

“Borrowers/customers can contact their banks via email or telephone if they are unable to have face-to-face engagements due to restriction of movement.

 

“For the safety of banks’ borrowers/customers and employees, banks in the CMCO areas are operating with heightened vigilance and adherence to the Covid-19 standard operating procedures (SOPs), ” they said.
 

ABM and AIBIM advised borrowers/customers in the affected areas to check on their respective banks' websites for information on any changes in operating hours or arrangements for over-the-counter services.

Borrowers/customers can also continue to perform banking services at all self-service terminals, such as automated teller machines (ATMs) and cash deposit machines (CDMs) located in the CMCO areas.

For more details on repayment assistance, the public can also contact ABM Connect via the ABM website: https://www.abm.org.my/eabmconnect or AIBIM at 03-2026 8002/8003 or via email: staff@aibim.com

Borrowers/customers who are still facing difficulties after consultation with their banks can contact BNMTELELINK at bnmtelelink@bnm.gov.my or call 1-300-88-5465.

Alternatively, borrowers/customers can also seek guidance and explore other options for assistance with AKPK by calling (03) 2616 7766.

Ringgit closes unchanged against US dollar

Oct 7, 2020
Ringgit closes unchanged against US dollar
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KUALA LUMPUR: The ringgit closed unchanged against the US dollar today, supported by rising crude oil prices and gains in global stock markets.

At 6 pm, the local currency was traded at 4.1500/1570 versus the greenback compared with 4.1500/1550 at yesterday's closing.

OANDA Asia Pacific senior market analyst, Jeffrey Halley, said markets rallied impressively overnight due to US President Donald Trump's return to the White House after three days of hospital treatment for coronavirus.

''Expectations have also lifted markedly as the Republicans and Democrats have agreed on a new fiscal stimulus package before the US elections,'' he told Bernama today.

At press time, Brent crude oil rose 0.63 per cent to US$41.55 per barrel.

Meanwhile, the ringgit was traded mostly lower against other major currencies.

It slipped against the Singapore dollar to 3.0521/0577 from 3.0501/0540 on Monday, and declined against the British pound at 5.3821/3929 from 5.3743/3824.

The local currency fell against the euro to 4.8879/8974 from 4.8792/8854, and depreciated versus the yen to 3.9303/9373 from 3.9292/9347 previously.

Ringgit closes higher against US dollar

Oct 6, 2020
Ringgit closes higher against US dollar
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KUALA LUMPUR: The ringgit closed higher against the US dollar today, supported by rising crude oil prices and gains in the global stock market following positive news on the United States President Donald Trump's health condition, a dealer said.

At 6 pm, the local currency was traded at 4.1500/1550 versus the greenback compared with 4.1620/1660 last Friday.

Last week, news emerged that President Trump, First Lady Melania and several of their top aides had been infected with COVID-19, jolting the US stock markets.

The Dow Jones, S&P 500 and Nasdaq ended in negative territory on Friday, sliding down by 0.48 per cent, 0.96 per cent and 2.22 per cent, respectively.
 

However, news that Trump may be discharged from the hospital later today helped to raise oil prices by about two per cent.

At press time, Brent crude oil price rose 3.57 per cent to US$40.67 per barrel.

Additionally, news reports stating that the White House is in the midst of preparing another stimulus package also boosted the global stocks market today.

Meanwhile, the ringgit was traded mostly higher against other major currencies.

It rose against the Singapore dollar to 3.0501/0540 from 3.0502/0543 last Friday and improved against the British pound at 5.3743/3824 from 5.3748/3821.

The local currency fell against the euro to 4.8792/8854 from 4.8766/8830 but appreciated versus the yen to 3.9292/9347 from 3.9582/9631 previously.

Simplifying the SME Digitalisation Grant journey

Oct 5, 2020
The pandemic has forced businesses to consider new possibilities and think differently. For the first time, meetings were done virtually, while some retailers had to rely on live streaming services to promote their products. 

At the same time, it was not an easy period for businesses, who had to adapt quickly to the new reality and ensure that they could still reach their customers, suppliers and employees despite the restrictions on activities.

A key lesson that many businesses walked away with from this pandemic is that they need to digitalise their services. Now that the country is recovering from the pandemic, it is a critical time for them to leverage on technology to increase their productivity and ensure business continuity.

''It is clear that we are heading towards an increasingly digital world, and businesses have the opportunity to be more agile, adaptable and embrace change for the better,'' says Kevin Lee Guan Keong, head of SME for Maxis Bhd.

SMEs, in particular, need to digitalise as they are an important contributor to the Malaysian economy. Maxis has been working with SMEs for years to assist them on this journey. In light of the pandemic, it has also been taking steps to assist these companies.

Most recently, the telecommunications company was identified as a Technology Solutions Provider (TSP) by the Malaysia Digital Economy Corporation (MDEC) for the SME Digitalisation Grant under Budget 2020.

''Our priorities for this segment are to help them kick start their business with bundled and cost-effective solutions for the short term. We also want to help them future-proof their business with the right technology,'' says Lee.

Among the telecommunications TSPs identified for the Grant, Maxis offers the widest range of connectivity and digital solutions, Lee adds, as it has more than 17 types of solutions to serve various business needs.

These include digital marketing, electronic Point-of-Sale (ePOS), remote working and e-commerce solutions, all of which leverage on Maxis' unique fixed and mobile network.

''Our digital and connectivity solutions under the SME Digitalisation Grant will benefit any business that manages a retail shop, office, restaurant, small factory and warehouse or more,'' says Lee.

There are two categories of solutions eligible for subsidies under the grant. The first is for Solutions-Only, which qualifies for a 50% subsidy of up to RM5,000. The other is the Connectivity and solutions bundle with a 30% subsidy up to RM3,000. 

''As SMEs can only apply once for the grant, they would be able to take up multiple types of digital and connectivity solutions for their business needs if they apply through Maxis, as we have the widest offerings,'' says Lee.

These grants are limited to the first 100,000 SMEs who apply to upgrade their systems: ''So those who are keen should quickly apply today,'' he adds.

To simplify the application process, Maxis partnered with Bank Simpanan Nasional to create an efficient and convenient application process. Maxis will help SMEs manage the entire application process with a completely digital on-boarding experience.

SMEs can also go to any of the 400 Maxis Branded stores nationwide to enquire about or apply for the grant. In addition, SMEs have access to a dedicated Maxis Help Squad to assist them to find the right digital and connectivity solutions.

''Essentially, we are making it easy for SMEs to get the grant because we will help them apply for it, follow up and once approved, we will notify them, saving them the hassle of managing their own submissions,'' says Lee.

Exclusive - Revitalising and reforming the economy

Sep 28, 2020
Exclusive - Revitalising and reforming the economy
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IT IS not easy to step into a position of authority and importance, especially when the nation is facing a crisis like never before.

A political crisis had engulfed the nation just prior to the outbreak of the global Covid-19 pandemic, but it was dealing with the potential economic catastrophe from shutting nearly the whole economy down to deal with the pandemic that was the real challenge for policy makers at the onset.

 

For Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz, the job was a mammoth task, given where the domestic and global economies were heading. He dug deep into his experience in the corporate sector to navigate through the task ahead.

“What I have learnt from CIMB Group Holdings Bhd is being adopted here at the Finance Ministry (MoF). I wanted to be transparent and have our stimulus packages monitored for execution, ” he says.

CEOs of listed companies are used to articulating their plans and targets, and there is a risk that those ambitions do not meet their intended objective.

For Tengku Zafrul, there is a need for people to know how the packages are being delivered, regardless of the risk of missing targets.But one big deviation from how things were announced in the past has been the people-centric approach in the packages announced.

It is stacked with initiatives that puts money directly into the pockets of the people and rightly so. As the government had to shut down nearly the entire economy, it was imperative that the stimulus packages protected lives and livelihoods.

“Earlier, it was about giving out money and that was it, you were done with the job. But now, the policy response has to be targeted, where the money is going to end up and making sure households survive, ” he says.

And that approach is yielding results.

The jobless rate, although at an elevated historical perspective, has come down from 5.3% in May to 4.7% in July, meaning jobs are being created and filled.

The economy too is seeing trade numbers and the surplus growing, along with industrial production back in positive territory.

“If you look at the economy today, in terms of employment, SMEs contribute 40% of GDP but employ 70% of the working population.

“So, you need to look at that angle, and at the same time, if you look at the impact of Covid-19 on the vulnerable sector, the B40 especially are the people who need a lot of help.“That’s where we want to target the BSH recipients. We need to give them extra because they can’t go to work, because most of them are in the informal sector.

“But as the economy opens up and as the global economy improves, hopefully, Malaysia will also improve and then I think the shift will be towards back to where we think the balance should be, ” he says.

Tengku Zafrul says having the Prihatin and Penjana packages helps, as they are going to contribute 3% to GDP because of the multiplier impact, and the recent RM10bil additional package will help with the fourth-quarter numbers.

That money will work its way faster into the economy rather than large development packages for roads, schools and other big-ticket items.

The government has taken steps to set up the economic recovery and the next two are to revitalise and reform it.

That will take form in the upcoming budget and also the 12th Malaysia Plan (12MP) early next year.

There will be a different approach in the upcoming budget where the MoF has kept its ear to the ground in all states to see what is required.

Effectiveness of spending will be paramount and although there will be a need for big projects, there has to be a blend between what big business want and what the man in the street needs.“My hope is that we look at the long term, with the understanding that if there is a need to change and adapt to things quickly, we should be able to do that, ” Tengku Zafrul says.

“I think one thing we always talk about today is actually all the disparity.

“How to bridge the disparity?

“How do we do that with the income and digital, education, and even regional disparity between the different parts of the country?”

TVET and education will be a focus and the budget will be a prelude to what the 12MP will entail.

“The other pillar that I mentioned is sustainability. There will be emphasis on sustainable production, consumption, and even conservation of natural resources and the environment, ” he says.

In a wide-ranging interview, Tengku Zafrul spoke on many issues. He answered a number of questions ranging from the job at hand to the economy, the upcoming Budget and also the political developments in the country.

BIMB Investment¡¯s Online Mobile Platform, BEST Invest, Wins ¡°The E-Commerce - Financial Services Awa

Sep 25, 2020
BIMB Investment¡¯s Online Mobile Platform, BEST Invest, Wins ¡°The E-Commerce - Financial Services Awa
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Kuala Lumpur, 22 September 2020 – BIMB Investment Management Berhad’s BEST Invest, a Robo-Intelligence Shariah-compliant ESG investing online mobile platform won the E-Commerce - Financial Services award at the Malaysia Technology Excellence Awards 2020.

The Chairman of BIMB Investment Management Berhad, Mohamed Ridza Mohamed Abdullah, said “We’ve always had Malaysians in the back of our minds when we created the BEST Invest app. With a simple smartphone, everyone can start investing in Shariah-compliant sustainable funds. We feel honoured to be presented with this prestigious award as it shows our commitment to making investing simple and easy to understand. We aim to encourage more Malaysians to start investing irrespective their financial background as we believe that financial inclusivity is the foundation of Islam”.

The awards event honours exceptional companies that lead the charge in developing groundbreaking projects, digital services, reimagined strategies and technological initiatives. Winners were judged based on uniqueness and innovation, effectiveness and impact and dynamism.

Nominees were judged by an elite panel consisting of Justin Ong, Partner and FSI Financial and Regulatory Risk Leader with Deloitte Asia Pacific, Alvin Gan SH, Executive Director, Partner and Head of IT-enabled Transformation (ITeT) with KPMG Malaysia, Hari Iyer, Executive Director for Advisory at BDO Malaysia, Michael Lim Jr, Managing Director of Crowe Growth Consulting Sdn Bhd, and Jade Leong, Advisory Partner at Ernst & Young.

The Singapore Business Review presented the award to BIMB Investment in an online ceremony on 11 September 2020 which was followed by an online video interview with the Chief Executive Officer of BIMB Investment Management Berhad, Najmuddin Mohd Lutfi, conducted by Paul Howell, Managing Editor of Singapore Business Review.

Speaking at the online award ceremony, Najmuddin said, “Almost 20,000 users have signed up with our BEST Invest app that offers Shariah and ESG unit trust funds across asset classes.  It includes global equities, Asia Pacific equities, Malaysia equities, global Sukuk and money market. BEST Invest app also has Robo-intelligence to assist and guide anyone to start investing.  For far too long, investing has relatively been for the few and those with the knowledge of investments. We’ve always believed that investing and innovation in terms of digital wealth solutions with user-friendliness for satisfying customer experience, should be for everyone, in other words, for all Malaysian from all walks of life.”

The BEST Invest app is BIMB Investment’s first Robo-Intelligence Shariah-compliant ESG investing online mobile platform that was launched earlier this year. As part of the company’s commitment to bringing sustainable investing to Malaysians, investors can start investing and building investment goals with a minimum of RM10 and at zero sales charge through the BEST Invest app. Investors can also invest and withdraw their investments anytime and anywhere.

The app also offers an investor the opportunity to start investing either by selecting the “Do it for Me” or the “Do it Myself” functions in the app. The “Do it for Me” function enables the Robo-Intelligence system to identify and select the best investment methods, suitable funds and the investment amount based on the investor’s risk profile. Alternatively, the “Do it Myself” function enables investors to choose the funds that they would like to invest in and invest without the assistance of the Robo-Intelligence system for a more customised experience.

BEST Invest focuses on Shariah-ESG and sustainability investing. The unit trust funds offered in BEST Invest app are all Shariah-compliant ESG funds managed by BIMB Investment Management Berhad. The topic was highlighted during the awards ceremony in light of the Covid-19 pandemic.

“Our Shariah-compliant and ESG approaches are part of that effort in promoting inclusive wealth management. Winning this award proves our belief in ESG-based investment products and investing in general, should be made accessible to everyone regardless of their background, especially in this unprecedented global situation caused by COVID-19. The twin combo of ESG and Shariah compliance promotes risk-adjusted and sustainable returns for the long run, and we believe that BEST Invest encapsulates this philosophy and is proud that BEST Invest can provide this to all man and woman.”


RHB launches digital FX service for corporate and SME customers

Sep 21, 2020
RHB launches digital FX service for corporate and SME customers
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KUALA LUMPUR: RHB Banking Group has launched RHB Live FX @ Reflex, a holistic digital foreign exchange (FX) service for both its corporate and SME customers which provide innovative FX services that revitalise cross border payments.

The RHB Live FX @ Reflex offers FX rates that can be executed real-time and enables seamless end-to-end processing of spot and forward transactions.

 

The banking group said in a statement that RHB Live FX @ Reflex comprises five main functions, namely exchange rate inquiry, indicative forward swap points, FX rate booking, contract rate inquiry and booking status Inquiry.

Customers will be able to monitor, book and execute all their FX conversion and hedging transactions online, and at their convenience, with the touch of a button. RHB Live FX @ Reflex is accessible via RHB Reflex @ https://reflex.rhbgroup.com/

RHB Live FX via RHB Reflex, the bank’s cash management solution, enriches customers’ FX journey through effortless online booking of spot, forward and time option contracts for 34 currency pairs in total.

It is the first and only digital platform among local banks in Malaysia to offer booking and early delivery or take up of FX forward contracts on one platform.

The RHB Reflex platform also enables online FEA declaration, no minimum FX booking amount and efficient straight through FX settlement.

“RHB Live FX @ Reflex capitalises on technological transformation to deliver a customer-centric service targeted at seamless online distribution and processing of FX products and services to provide our customers with greater value and convenience.

“Through this versatile platform, our corporate and SME customers can actively manage their foreign currency exposure by accessing real time foreign currency rates to monitor, book and execute FX transactions online, ” said RHB Banking Group managing director Datuk Khairussaleh Ramli.

“RHB Live FX @ Reflex was developed to serve customers more efficiently and conveniently, and is projected to grow our foreign exchange volume by 20% by 2022, ” he added.RHB Banking Group has achieved good traction in Internet and mobile banking transaction growth and continues to pursue further enhancements to its digital capabilities.

Through its business Internet banking platform RHB Reflex, customers are provided the flexibility of managing online transactions and reconciliation of accounts that provides them with better control and visibility over cash management needs.

New customers can open a RHB Business Current Account with access to RHB Reflex via RHB’s corporate website at www.rhbgroup.com

Ringgit heads for a strong finish

Sep 17, 2020
Ringgit heads for a strong finish
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PETALING JAYA: The ringgit is heading for a strong close against most major currencies at the end of the third quarter, with the local economy showing resilience amidst the pandemic that is continuing to wreak havoc on many countries.

On Tuesday, the ringgit was at a seven-month high against the US dollar at 4.133

 

The ringgit’s quick recovery from its Covid-19 blues in March was boosted by the US dollar’s steep decline, which is being undermined by the Federal Reserve’s ultra-loose monetary policy.

The US Dollar Index, which measures the greenback’s performance against a basket of major currencies, has tumbled nearly 10 % from a recent peak in March.

“The weak dollar was due to expectations that the US economy is weakening, ” Alliance Bank’s chief economist Manokaran Mottain (pic above) told StarBiz.

On the ringgit, he reckoned that the currency would test RM4.10 per dollar in the near term, due to Budget 2021, as well as further strengthening in crude palm oil (CPO) and Brent crude oil prices.

“The pressure points will be how the government is going to manage its fiscal deficits and the tabling of Budget 2021, which we expect will be an expansionary budget, ” Manokaran said.

The strength of the ringgit, he said, was also helped by the glove manufacturers that have been bringing money back into the country.

CPO prices have been on the uptrend and recently went above RM2,800 per tonne, while Brent crude oil is trading at above US$42 per barrel.

The ringgit’s strength would be a boon to importers, but it could be a negative for exporters who could see a decline in earnings.

Glove makers, electric and electronic (E&E) manufacturers as well as furniture players, all exporters, could be affected by a stronger ringgit.

Rakuten Trade Research vice-president Vincent Lau, however, expects that the impact would be minimal on exporters, especially the glove players who have been experiencing a historical high in their selling prices.

“Many E&E manufacturers have already hedged their position for the next six months and the glove players are seeing their orders and average selling prices for their products increasing sharply, ” he said.

The outlook for the ringgit is positive, Lau said.

“We expect the ringgit to strengthen further, especially if Brent crude oil continues to improve, but it’s not likely to dip below RM4 per dollar, ” he said.

Meanwhile, Bank Islam chief economist Mohd Afzanizam Abdul Rashid (pic below) reckoned that the interest rate differentials between Malaysia and advanced economies have driven the ringgit higher.
 

“The overnight policy rate (OPR) is clearly higher than the benchmark rates in the advanced countries.

“So, from the carry trade point of view, the ringgit could rise. At the moment, the OPR stands at 1.75% while the US Federal Fund Rate remains at 0.25%.

“That’s a 150-basis-point difference between the OPR and the Fed Fund Rate, ” he said.

In addition, he said the country’s ability to contain the Covid-19 spread was a plus point as the economic recovery process can happen almost immediately, allowing for a sustained increase in the gross domestic product.

“However, the economic uncertainty remains elevated and therefore, the US dollar-ringgit rate is expected to remain volatile.

“We are still projecting that the ringgit could end the year at RM4.25. Events like a trade war between the US and China, the US presidential election, the UK Brexit and lower crude oil prices are likely to exert volatility in the foreign-exhange markets, ” Afzanizam said.

Asked if the ringgit could further strengthen from its current level, he said the ringgit against the US dollar was currently undervalued.

He pointed out that the average value of the ringgit per unit of US dollar stood at about RM3.62 since the currency peg was removed in July 2005.

Banks gear up to face headwinds

Sep 14, 2020
Banks gear up to face headwinds
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PETALING JAYA: With the banking sector’s dismal second-quarter performance, industry captains are not wasting any time as they gear up to navigate headwinds and improve bottom lines for this year and next.

Malaysian banks’ earnings have been weighed down by large modification losses, pre-emptive provisions and significant margin compression.

 

The modification charges came about as banks are unable to charge interest on the installments of hire-purchase loans and Islamic financing under the six-month moratorium. At the same time, margins have been severely compressed by the numerous overnight policy rate (OPR) cuts.

The tough economic climate spurred by the Covid-19 pandemic and headwinds also deterred major banks like Malayan Banking Bhd (Maybank), CIMB GroupPublic Bank Bhd and RHB Bank Bhd from paying out dividends in the second quarter.

 

Public Bank managing director and CEO Tan Sri Tay Ah Lek (pic below)told StarBiz the group is in a good position to navigate the challenges, supported by its resilient loan portfolio, prudent lending practices and strong credit-risk profile.

“Under any adverse economic conditions, the earnings sustainability of banks will be very much dependent on the level of asset quality and the extent of credit charges. For the group, its strong asset quality and prudent credit management will provide support to its earnings stability, ” he told StarBiz in an e-mail reply.

In terms of asset quality, the group’s impaired loan ratio as at June 30,2020 stood at 0.4% as compared with the industry’s gross impaired loan ratio of 1.5%. Gross impaired loan ratio for the banking sector in July this year stood at 1.43%.

He said although the asset quality stress is expected to increase, the group has put in pre-emptive measures to ensure its asset quality remained manageable.

For example, Tay said, Public Bank has been proactively engaging customers who continue to face cash flow constraint when the moratorium ends this month.

Several repayment assistance packages have been put in place which suit different customers’ financial conditions.

“All these initiatives will certainly mitigate the asset quality stress arising from the difficult economic conditions, ” Tay noted.

He said the group has remained conservative and prudent in setting aside higher provisions due to the significant uncertainties persisting in the operating environment as reflected in its high reserves for loan losses, which stood at 301.7%, inclusive of regulatory reserves.

With these, Tay said the group’s credit cost is expected to be manageable and this would help to support its earnings.

Public Bank reported a net profit of RM1bil in the second quarter, down by 24.8% from RM1.33bil a year ago due to a one-off net modification loss of RM498.4mil related to Covid-19 relief measures.

On revenue growth, the group would remain focused on organic growth strategy in retail consumer and commercial banking.

The group would continue to leverage on the various government and Bank Negara’s initiatives such as the Penjana financing schemes and Home Ownership Campaign to grow its loan portfolio.

In 2019, the group’s loan portfolio expanded by 4.1% and it expects loan growth to be at 3% to 4% for 2020.

Some of the major banking groups also reported second-quarter results that were below expectations. For the second quarter ended June 30, the country’s largest lender by asset Maybank’s net profit plunged 51.55% to RM941.73mil from RM1.94bil due to higher allowances for impaired loans.

The second-largest lender CIMB Group was also not spared. For the second quarter, the group’s net profit plunged nearly 82% year-on-year to RM277mil.

RHB Bank’s group net profit for the quarter under review dropped 34.9% year-on-year to RM400.8mil.

RHB Banking Group managing director Datuk Khairussaleh Ramli (pic below) said the group has undertaken a few initiatives to manage funding costs and overheads, which are now bearing results.

With these, Tay said the group’s credit cost is expected to be manageable and this would help to support its earnings.

Public Bank reported a net profit of RM1bil in the second quarter, down by 24.8% from RM1.33bil a year ago due to a one-off net modification loss of RM498.4mil related to Covid-19 relief measures.

On revenue growth, the group would remain focused on organic growth strategy in retail consumer and commercial banking.

The group would continue to leverage on the various government and Bank Negara’s initiatives such as the Penjana financing schemes and Home Ownership Campaign to grow its loan portfolio.

In 2019, the group’s loan portfolio expanded by 4.1% and it expects loan growth to be at 3% to 4% for 2020.

Some of the major banking groups also reported second-quarter results that were below expectations. For the second quarter ended June 30, the country’s largest lender by asset Maybank’s net profit plunged 51.55% to RM941.73mil from RM1.94bil due to higher allowances for impaired loans.

The second-largest lender CIMB Group was also not spared. For the second quarter, the group’s net profit plunged nearly 82% year-on-year to RM277mil.

RHB Bank’s group net profit for the quarter under review dropped 34.9% year-on-year to RM400.8mil.

RHB Banking Group managing director Datuk Khairussaleh Ramli (pic below) said the group has undertaken a few initiatives to manage funding costs and overheads, which are now bearing results.With these, Tay said the group’s credit cost is expected to be manageable and this would help to support its earnings.

Public Bank reported a net profit of RM1bil in the second quarter, down by 24.8% from RM1.33bil a year ago due to a one-off net modification loss of RM498.4mil related to Covid-19 relief measures.

On revenue growth, the group would remain focused on organic growth strategy in retail consumer and commercial banking.

The group would continue to leverage on the various government and Bank Negara’s initiatives such as the Penjana financing schemes and Home Ownership Campaign to grow its loan portfolio.

In 2019, the group’s loan portfolio expanded by 4.1% and it expects loan growth to be at 3% to 4% for 2020.

Some of the major banking groups also reported second-quarter results that were below expectations. For the second quarter ended June 30, the country’s largest lender by asset Maybank’s net profit plunged 51.55% to RM941.73mil from RM1.94bil due to higher allowances for impaired loans.

The second-largest lender CIMB Group was also not spared. For the second quarter, the group’s net profit plunged nearly 82% year-on-year to RM277mil.

RHB Bank’s group net profit for the quarter under review dropped 34.9% year-on-year to RM400.8mil.

RHB Banking Group managing director Datuk Khairussaleh Ramli (pic below) said the group has undertaken a few initiatives to manage funding costs and overheads, which are now bearing results.

Banks gear up to face headwinds

Sep 14, 2020
Banks gear up to face headwinds
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PETALING JAYA: With the banking sector’s dismal second-quarter performance, industry captains are not wasting any time as they gear up to navigate headwinds and improve bottom lines for this year and next.

Malaysian banks’ earnings have been weighed down by large modification losses, pre-emptive provisions and significant margin compression.

 

The modification charges came about as banks are unable to charge interest on the installments of hire-purchase loans and Islamic financing under the six-month moratorium. At the same time, margins have been severely compressed by the numerous overnight policy rate (OPR) cuts.

The tough economic climate spurred by the Covid-19 pandemic and headwinds also deterred major banks like Malayan Banking Bhd (Maybank), CIMB GroupPublic Bank Bhd and RHB Bank Bhd from paying out dividends in the second quarter.

 

Public Bank managing director and CEO Tan Sri Tay Ah Lek (pic below)told StarBiz the group is in a good position to navigate the challenges, supported by its resilient loan portfolio, prudent lending practices and strong credit-risk profile.

“Under any adverse economic conditions, the earnings sustainability of banks will be very much dependent on the level of asset quality and the extent of credit charges. For the group, its strong asset quality and prudent credit management will provide support to its earnings stability, ” he told StarBiz in an e-mail reply.

In terms of asset quality, the group’s impaired loan ratio as at June 30,2020 stood at 0.4% as compared with the industry’s gross impaired loan ratio of 1.5%. Gross impaired loan ratio for the banking sector in July this year stood at 1.43%.

He said although the asset quality stress is expected to increase, the group has put in pre-emptive measures to ensure its asset quality remained manageable.

For example, Tay said, Public Bank has been proactively engaging customers who continue to face cash flow constraint when the moratorium ends this month.

Several repayment assistance packages have been put in place which suit different customers’ financial conditions.

“All these initiatives will certainly mitigate the asset quality stress arising from the difficult economic conditions, ” Tay noted.

He said the group has remained conservative and prudent in setting aside higher provisions due to the significant uncertainties persisting in the operating environment as reflected in its high reserves for loan losses, which stood at 301.7%, inclusive of regulatory reserves.

With these, Tay said the group’s credit cost is expected to be manageable and this would help to support its earnings.

Public Bank reported a net profit of RM1bil in the second quarter, down by 24.8% from RM1.33bil a year ago due to a one-off net modification loss of RM498.4mil related to Covid-19 relief measures.

On revenue growth, the group would remain focused on organic growth strategy in retail consumer and commercial banking.

The group would continue to leverage on the various government and Bank Negara’s initiatives such as the Penjana financing schemes and Home Ownership Campaign to grow its loan portfolio.

In 2019, the group’s loan portfolio expanded by 4.1% and it expects loan growth to be at 3% to 4% for 2020.

Some of the major banking groups also reported second-quarter results that were below expectations. For the second quarter ended June 30, the country’s largest lender by asset Maybank’s net profit plunged 51.55% to RM941.73mil from RM1.94bil due to higher allowances for impaired loans.

The second-largest lender CIMB Group was also not spared. For the second quarter, the group’s net profit plunged nearly 82% year-on-year to RM277mil.

RHB Bank’s group net profit for the quarter under review dropped 34.9% year-on-year to RM400.8mil.

RHB Banking Group managing director Datuk Khairussaleh Ramli (pic below) said the group has undertaken a few initiatives to manage funding costs and overheads, which are now bearing results.

With these, Tay said the group’s credit cost is expected to be manageable and this would help to support its earnings.

Public Bank reported a net profit of RM1bil in the second quarter, down by 24.8% from RM1.33bil a year ago due to a one-off net modification loss of RM498.4mil related to Covid-19 relief measures.

On revenue growth, the group would remain focused on organic growth strategy in retail consumer and commercial banking.

The group would continue to leverage on the various government and Bank Negara’s initiatives such as the Penjana financing schemes and Home Ownership Campaign to grow its loan portfolio.

In 2019, the group’s loan portfolio expanded by 4.1% and it expects loan growth to be at 3% to 4% for 2020.

Some of the major banking groups also reported second-quarter results that were below expectations. For the second quarter ended June 30, the country’s largest lender by asset Maybank’s net profit plunged 51.55% to RM941.73mil from RM1.94bil due to higher allowances for impaired loans.

The second-largest lender CIMB Group was also not spared. For the second quarter, the group’s net profit plunged nearly 82% year-on-year to RM277mil.

RHB Bank’s group net profit for the quarter under review dropped 34.9% year-on-year to RM400.8mil.

RHB Banking Group managing director Datuk Khairussaleh Ramli (pic below) said the group has undertaken a few initiatives to manage funding costs and overheads, which are now bearing results.With these, Tay said the group’s credit cost is expected to be manageable and this would help to support its earnings.

Public Bank reported a net profit of RM1bil in the second quarter, down by 24.8% from RM1.33bil a year ago due to a one-off net modification loss of RM498.4mil related to Covid-19 relief measures.

On revenue growth, the group would remain focused on organic growth strategy in retail consumer and commercial banking.

The group would continue to leverage on the various government and Bank Negara’s initiatives such as the Penjana financing schemes and Home Ownership Campaign to grow its loan portfolio.

In 2019, the group’s loan portfolio expanded by 4.1% and it expects loan growth to be at 3% to 4% for 2020.

Some of the major banking groups also reported second-quarter results that were below expectations. For the second quarter ended June 30, the country’s largest lender by asset Maybank’s net profit plunged 51.55% to RM941.73mil from RM1.94bil due to higher allowances for impaired loans.

The second-largest lender CIMB Group was also not spared. For the second quarter, the group’s net profit plunged nearly 82% year-on-year to RM277mil.

RHB Bank’s group net profit for the quarter under review dropped 34.9% year-on-year to RM400.8mil.

RHB Banking Group managing director Datuk Khairussaleh Ramli (pic below) said the group has undertaken a few initiatives to manage funding costs and overheads, which are now bearing results.


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