Banking sector remains resilient BY NG BEI SHAN

by **Cals** Mon 30 Dec 2013, 00:04

Published: Saturday December 28, 2013 MYT 12:00:00 AM
Updated: Saturday December 28, 2013 MYT 12:21:52 PM
Banking sector remains resilient
BY NG BEI SHAN
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The banking industry is expecting growth of between 8% and 10% on continued expansion of the economy fuelled by private consumption.
THE banking industry is expecting growth of between 8% and 10% on continued expansion of the economy fuelled by private consumption and the on-going large multi-billion ringgit infrastructure projects under the Economic Transformation Programme (ETP), according to banking experts.
Malayan Banking Bhd (Maybank) president and chief executive officer (CEO) DatukAbdul Farid Alias tells StarBizWeek in an e-mail that the Government can now focus on managing the economy as the major events that caused political overhang in the country are over.
He says external headwinds such as the economic recovery in the eurozone, the execution of economic reforms and rebalancing in China, the monetary policies of the United States and Japan together with the macroeconomic management and policies in emerging market economies, will impact the economy via variables such as capital flows, currencies and financial markets.
At the Asean level, banks willneed to prepare for the Asean Economic Community, which will be implemented at the end of 2015 and will facilitate the movement of goods and services, investment, capital and talents within the region.
Public Bank Bhd founder and chairman Tan Sri Teh Hong Piow says stronger players in the domestic front will mean a more competitive banking landscape while the product cycle for banking products and services is getting shorter due to increased industry-wide competition and it is more challenging to meet the increasing customer expectations.

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Viegas expects retail loans to moderate to 10% growth from a projected 13% in 2013.
He expects loan growth to sustain at a moderate rate of between 8% and 10%, on expectations of sustainable domestic economic growth, underpinned by private sector activity.
Teh says on-going implementation of ETP projects and a gradual improvement in the external sector will continue to sustain business investment, while loans for the purchase of properties will continue to be supported by high rate of household formation, accommodative interest rate, higher income and low unemployment rate.
As for retail loans growth, CIMB Bank group deputy CEO and head of consumer banking Renzo Viegas expects retail loans to moderate to 10% growth from a projected 13% in 2013 as the responsible financing guidelines, including the recent property-cooling measures continue to make their impact.
Farid points out that the cut in subsidies as well as the implementation of the goods and services tax in 2015 will lead to a moderation in household loans next year with inflation and worries over asset quality among other concerns.
“Liquidity is also a challenge and funding costs could rise as a result, contributing to further net interest margin (NIM) compression,” he explains.
Teh expects NIM to be squeezed further due to stiff price competition but expects margins to be steady given the stable interest rate environment.
Farid says Maybank will be seeking opportunities to grow organically in the region with Myanmar and Thailand among the markets.
Teh, on the other hand, assures that Public Bank’s succession plan remains in place.
“Over the years, key senior management personnel had retired and the vacancies were filled by internal promotion of the earmarked candidates who have the requisite experience and skills, resulting in a smooth and uninterrupted transition,” he says.

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Teh expects NIM to be squeezed further due to stiff price competition.

On merger and acquisitions (M&As), RHB Research Institute head Lim Chee Sing says the recent corporate activities appear to be centred on strengthening further the existing franchise and filling up gaps and opines that there could be a pause given the recent spate of activities.
However, Alliance Research analyst Cheah King Yoong says the increasingly competitive environment may possibly induce smaller domestic banks to consolidate and/or pursue further integration with their foreign strategic partners.
He points out the possibility of re-emergence of M&A newsflow from RHB Capital Bhd in view of the relative under performance of its share price and its attractive valuation.