No moratorium extension but banks will offer restructuring & rescheduling: BNM


Malaysia’s loan moratorium will end in September despite calls for an extension but lenders will offer targeted financial aid via “restructuring and rescheduling” (R&R) for affected borrowers, said analysts citing Bank Negara Malaysia (BNM).

“BNM guided that the upon expiry of the automatic loan moratorium by end-Sept 2020, banks will not be extending this further but will continue to offer targeted financial assistance in the form of R&R to borrowers who continue to face repayment issues. 

“In the meantime, loans which are subject to R&R will not be classified as ‘impaired’ for genuine cases, i.e. borrowers facing temporary restraints on their cash flows,” Affin Hwang Capital analyst Tan Ei Leen wrote in a note last Friday following an analyst briefing with BNM on Thursday.

The government had imposed a six-month automatic loan moratorium beginning April this year, to help individuals and businesses hit by the Covid-19 pandemic. 

Of late, there have been increasing calls from the public and various industry quarters asking for a moratorium extension as many are still struggling to stay afloat.

Tan said banks’ expected credit losses will remain elevated in 2020 up to 2021, as the Malaysian Financial Reporting Standards 9 (MFRS 9) will still remain applicable, whereby loans will be subject to the staging process (Stage 2 & 3). 

“At this juncture, we continue to be wary of further rise in business foreclosures, especially for higher risk sectors such as the tourism-related, wholesale and retail, airlines-related, construction, real-estate and manufacturing industries,” she added.

MIDF Research head Imran Yassin Yusof said non-performing loans (NPLs) and credit costs will increase once the moratorium ends in September. 

The regulators opine that impairments will peak in 2021, he wrote in a report last Friday. 

“We believe that the most likely source of stress to banks’ asset quality could come from the business segment, especially small and medium enterprises (SMEs),” Imran said, attributing this to SMEs’ weakened financials amid the movement control order (MCO).

According to BNM, the take-up rate of the loan moratorium by households and SMEs declined to 85% recently, from 90% since the moratorium commenced in April. 

The central bank also said it will not impose a ‘blanket restriction’ on banks’ dividend payments as seen in other countries, rather dividend payments will be subject to each individual lender’s stress-testing by BNM. Key criteria include a bank’s profitability prospects and capital buffers. 

MIDF Research maintained its ‘neutral’ call for the banking sector as it expects the economic impact of the MCO will hit loan growth and asset quality. 

The research house downgraded Malayan Banking Bhd (Maybank) to “Neutral” from “Buy” but kept its target price on the country’s largest bank at RM8.20, citing expected higher credit costs and questionable asset quality in Maybank’s Indonesia operations.

It also lowered Public Bank Bhd to “Neutral” while maintaining a target price of RM17.20, as provisions will continue to weigh on earnings. The bank’s weak income may not be able to moderate increased credit cost, MIDF Research added.

Meanwhile, Affin Hwang Capital is staying ‘underweight’ on the sector as it continues to face difficulties. 

“Though we expect a 13% year-on-year (YoY) recovery in sector core net profit in 2021, this is subsequent to a drastic decline of 28.6% YoY in 2020.

“Banks’ balance sheet and liquidity will be subject to more stress in 2020 to 2021 due to the moratorium period offered to borrowers as well as higher risk of defaults as economic circumstances remain uncertain,” it added.