Malaysian banks to stay resilient amid negative outlook by S&P – RHB

KUALA LUMPUR: Malaysian banks should remain resilient despite rating agency S&P Global’s (S&P) negative outlook on the sector, said RHB Bank Bhd.

S&P has reaffirmed an A- rating to Maybank, CIMB and Public Bank, while RHB and AmBank are at BBB+ with all five placed under a negative outlook.

In a research note today, RHB viewed S&P’s move as likely in response to the government’s further request for an interest waiver on the bottom 50 per cent (B50) income group segment for three months beginning October 2021.

This came after the six-month opt-in loan moratorium earlier and the automatic moratorium last year, it said.

“The increased risk of government intervention in the Malaysian banking sector is negative, which could lead to further deterioration in asset quality.

“We do not expect any price reaction on the banks’ bonds from this comment and we expect credit spread to remain steady as evident from previous outlook downgrade last year,” said RHB.

Meanwhile, it said that the 10-year US Treasury yield (UST 10 YR) rose as much as nine basis points (bps) to 1.41 per cent in response to the Federal Reserve’s readiness to taper which is expected to increase the potential of an interest rate hike next year.

“The overall Malaysian government securities (MGS) benchmark yields could be biased to the upside in response to the UST 10 YR yields upward movement,” RHB said. – Bernama