KUCHING: Government measures provided a much needed lift for banks especially after the economic slowdown during the movement control order, but analysts believe the impact will not be long lasting as the measures are short-term.
AllianceDBS Research Sdn Bhd (AllianceDBS Research) observed that recent trends showed better traction with June figures achieving annualised year-to-date growth of 10 per cent, again driven by the wholesale/retail trade, finance/insurance/real estate, and manufacturing sectors.
This compares against the non-small and medium enterprises (SMEs) which grew at two per cent over the same period.
“Sequentially, SME loans expanded at a four per cent clip. We believe Bank Negara Malaysia’s (BNM) efforts to extend aid to pressured SMEs amid the lockdown measures had provided strong support,” it said yesterday in a sector review.
To recap, BNM had extended funding of up to RM13 billion to SMEs through four programmes, which was channelled through 18 banks. In May, it also upsized its Special Relief Facility by RM5 billion to RM10 billion.
Overall loans growth only picked up in March when BNM announced its various funding facilities, and accelerated in the second quarter as loans were disburses.
“The six-month loan moratorium also provided a larger loans base, given between 70 and 90 per cent of the respective banks’ SME customers had opted in,” AllianceDBS Research continued, addinf that tepayments saw more than 20 per cent dip up till June compared to March.
“Meanwhile, the lockdown measures had resulted in depressed loan disbursements in April and May on the back of the more limited business operations of the banks, but rebounded strongly in June as the Recovery Movement Control Order (RMCO) set in and business activities stepped up.”
Banks also saw better asset quality coinciding with loan moratorium. The asset quality of loans to SMEs improved on a y-o-y basis in June 2020, whereby gross impaired loans (GIL) ratio fell to 2.53 per cent from 2.69 a year ago.
GIL ratios for SMEs improved to 3.11 and 2.17 per cent — from 3.29 and 2.48 per cent a year ago — while the micro-SME GIL ratio rose to 2.61 per cent from 2.47 a year ago (due to a larger reduction in the micro-SME loans base).
“With the extended moratorium on a targeted basis for exposed borrowers, any stresses on SMEs will likely not be readily apparent until 2021.
“We have a bearish view on loans growth at three per cent for 2020 forecast, with the expectation that banks will remain conservative in their underwriting processes given the economic uncertainties and lingering asset-quality concerns,” it continued.
“For SME loans, momentum will likely slow when relief facilities are exhausted and the loan moratoriums end in 3Q20, thus requiring a stronger pace of economic recovery in 2H20. That said, we think certain banks like HLBK could still outperform the system for loans growth.
“All in all, the larger earnings swings for the banks will still lie in credit costs, where October and December will be the crucial timings determining the degree of conservatism required for additional provisions. HLBK is our top pick as we think the stock has been overlooked despite consistently clocking in robust performance.”
Source: https://www.theborneopost.com/2020/09/08/short-term-lift-for-banks-but-for-how-long/