Loan deferment will impact banks’ net interest income, provisions

Analyst says banks will have to classify R&R accounts as impaired, which could lead to additional provisions


THE move by several banks to allow delayed payment to customers affected by the Covid-19 pandemic will result in impacted revenues and provisions due to expected weaker interest income.

MIDF Amanah Investment Bank Bhd senior analyst Imran Yassin, however, said it should be viewed as revenue deferred rather than revenue loss.

“We believe the second impact will be on provisions. We could view this as a loan restructuring or rescheduling (R&R) exercise,” he told The Malaysian Reserve recently.

Imran said under normal circumstances, banks will have to classify R&R accounts as impaired, which could lead to additional provisions.

Several banks have decided to provide financial relief to assist their customers, especially during the current crucial time, as individuals are financially affected by the pandemic.

Among the banks that provide Special Relief Facilities (SRF) include Malayan Banking Bhd (Maybank) where it gives moratorium on loan repayments for up to six months. The financial relief will be made available for both its business, and small and medium enterprise (SME) customers, including individuals affected by the pandemic.

Customers can also apply for collateral-free financing for up to RM1 million from March 6 until Dec 31.

Affin Bank Bhd and Affin Islamic Bank Bhd provide a moratorium for up to six months, as well as R&R financing facilities for customers who subscribe to mortgage, hire purchase, credit cards, education financing, Amanah Saham Nasional Bhd financing and personal financing.

As for SMEs, the bank also participates in Bank Negara Malaysia’s (BNM) SRF for the group which covers SME Automation and Digitalisation Facility, and Agrofood Facility.

Imran said there might be some leeway for banks in terms of classifying such accounts, where banks may not have to categorise it as impairments.

“This should cushion the bank’s asset quality from deteriorating extensively,” he added.

Meanwhile, OCBC Bank (M) Bhd has also extended targeted relief measures to support impacted customers. The measures include a six-month moratorium on principal payment for housing loans/financing, bridging loans and additional working capital lines, along with supporting the SRF for SMEs.

Its CEO Datuk Ong Eng Bin said it is still too early to tell the impacts these moves will have on banks.

“Since we are fighting a far bigger battle here, our focus remains on helping customers and stakeholders overcome the most immediate threats for their long-term wellbeing,” he said in an email reply to TMR.

Wan Junaidi says SME Bank is also providing financing through SRF provided by BNM – pic by MUHD AMIN NAHARUL

Last week, Entrepreneur Development and Cooperatives Minister Datuk Seri Dr Wan Junaidi Tuanku Jaafar announced that SME Bank Malaysia Bhd is now offering a special financing up to a maximum of RM1 million to SMEs affected by the Covid-19 outbreak through the SRF provided by BNM.

“The financing offered is in the form of working capital requirements and is available from March 6 to Dec 31. The financing period is five years with a competitive profit rate of 3.75% per annum and without collaterals,” Wan Junaidi said.

Among other banks that also play their part in providing financial relief to their customers amid the pandemic include:

HSBC Bank Malaysia Bhd

HSBC Bank Malaysia allows its commercial banking customers who run SMEs to apply for moratoriums, while government-guaranteed borrowing facilities will continue to support those who need access to financing. The bank also allows its wealth and personal banking customers to apply for interest only payment and moratorium for up to six months on loan, mortgages and retail business banking. Credit card customers are also eligible to apply for a moratorium for payments up to six months.

Repayment flexibility with extension of trade loans payment period for 30 days is made available for its wholesale banking customers. The bank has pre-approved a 30-day extension for trade loans maturing between March 18 and March 31 for those with sound trade finance record, without any additional fee or penalty interest.


AmBank Group

The group offers both its individual and business customers temporary payment deferment and is also engaging with customers via its relationship managers to extend their trade bills by one cycle in order to cushion the impact on cashflow.

It also offers SMEs SRF financing of up to RM1 million, where those applying will get an approval within 24 hours and disbursement within five days of approval.

Bank Islam Malaysia Bhd

Bank Islam is also offering a moratorium of financing repayments of up to six months, on top of R&R financing programmes.

Business customers and eligible SMEs are able to obtain up to RM1 million in financing for up to 5½ years. This includes a moratorium on financing repayments for up to six months at a financing rate of 3.75% per annum.

CIMB Bank Bhd and CIMB Islamic Bank Bhd

Like most banks, CIMB Bank is providing a moratorium on loan repayments for up to six months to affected customers in the hardest hit sectors by the outbreak, in addition to the R&R financing programmes offered to all affected individual and business customers.

Business customers and eligible SMEs are able to obtain financing up to RM1 million for a tenure of up to 5½ years. This includes a moratorium on loan repayments for a six-month period at a financing rate of 3.75% per annum.

– pic by BLOOMBERG

Alliance Islamic Bank Bhd

Alliance Islamic is extending its assistance to affected customers by deferment financing servicing and financing R&R up to six months, as well as waiver of late charges of financing.

Public Bank Bhd and Public Islamic Bank Bhd

Public Bank is offering immediate moratorium of up to six months for monthly instalment payments of loans and financing. It will also accommodate requests by affected customers to restructure or reschedule their loans and financing.