Malaysian banks optimise depposit rates and lending

PETALING JAYA: Competition for fixed deposits (FDs) is set to continue as banks eye new liquidity by offering better interest rates to depositors following the postponement of the Basel III liquidity requirement rules. Industry analysts said banks would also likely optimise their lending ability moving forward.

Ambrose: ‘Malaysia has a well-functioning banking system while Europe does not and the US barely does.’

“It's not good to be too conservative in lending. It is important for the overall economic wellbeing of the country and it gives life to businesses, bringing prosperity to the country,” said a banking analyst from one of the four largest local banks by asset size.

According to Gerald Ambrose, the managing director of fund management company Aberdeen Asset Management Sdn Bhd, the stricter Basel III requirements to ensure banks are well capitalised may not be too suitable for Malaysia which presently has a well-functioning banking system.

“Malaysia has a well-functioning banking system while Europe does not and the US barely does. I think capital requirements that are too strict may potentially stifle economic activities,” Ambrose told StarBiz over the telephone recently.

Commenting on recent banking statistics, RHB Research in a recent note said the November 2012 system statistics showed loans growth had eased to 11.2% year-on-year (y-o-y) from 11.8% y-o-y growth in October 2012.

“The slower pace of growth was attributed to higher repayments during the month, partly mitigated by stronger disbursements. Meanwhile, household loans continued to expand at a steady pace of 11.6% yoy,” RHB Research analyst David Chong said in the report.

Chong noted Nov 2012's total system deposits grew 11.3% yoy with this growth being broad based' with loans to deposit ratio unchanged month-on-month (m-o-m) at 81.6%, the system core capital ratio was at 13.4% and risk-weighted capital ratio stood unchanged m-o-m at 15.3%.

According to Alliance Research banking analyst Cheah King Yoong, these statistics showed the domestic banking system remained “well capitalised” and “resilient to withstand unanticipated shocks to the financial system, if any.”

Cheah added that lending activities did not pick up towards the end of 2012 which could be due to both lenders and borrowers turning cautious with the impending general election which is widely expected to be held in March.

“We reiterate that there could be two potential de-rating catalysts, which pose downside risks to our 7-9% loan growth forecasts for 2013.

“These are (that) lending activities could decelerate in the first quarter of 2013 with slowing corporate loan disbursements and consumers turning cautious pending the upcoming general election,” Cheah said.

“Post-election, should the federal government implement (the) goods and services tax, resume its subsidies rationalisation programme and raise the electricity tariff to close its budget deficit; these fiscal tightening policies could have an adverse impact on consumer spending and consumer loans in the later part of 2013,” he added

By DANIEL KHOO danielkhoo@thestar.com.my

Related articles

• Time to put Basel III where it belongs.....#ecb #banks #spiral #stagnation #unemployment (simplesimon8.wordpress.com)

Chance to invest in distressed assets

Distressed property markets where deals are difficult to finance and yield spreads are at all-time highs provide attractive investment opportunities, according to Morgan Stanley’s real estate unit.

In the Asia-Pacific region, Morgan Stanley Real Estate Investing is most focused on China, India, Australia and Japan, said Olivier de Poulpiquet, who helps oversee $36 billion in real estate assets as the global co-head for the unit.

In India and China, demand is driven by strong demographic trends amid a dearth of financing, while in Australia and Japan, low borrowing costs are providing opportunities, he said.

Morgan Stanley, with a team of 280 globally in 11 countries dedicated to the property business, has about 45 percent of its investments in the U.S., 33 percent in Asia and about 22 percent in Europe.

In many developed markets, such as U.S., Japan and Australia, the yield spread between real estate and the risk free rate, typically the interest rate on U.S. Treasury bills, is as much as 400 basis points, de Poulpiquet said.

“Asia and the U.S. will continue to offer opportunities,” de Poulpiquet said in an interview in Singapore yesterday. “Investments in real estate have seen a flight to safety globally and in particular in the U.S. and Europe.”

Interest in property investments by institutional investors is improving as the asset class is viewed as an effective portfolio diversifier and an inflation hedge, de Poulpiquet said. Allocations to real estate by major institutions may climb from an average of 7 percent currently to 10 percent, he said, without providing a time frame for the increase.

India, China

In India and China, Morgan Stanley is finding opportunities by financing developers that are seeking money to complete projects amid a scarcity of capital, de Poulpiquet said.

In its almost three-year effort to tighten the property market, the Chinese government has raised down-payment and mortgage requirements, imposed a property tax for the first time in Shanghai and Chongqing, and enacted home-purchase restrictions in about 40 cities. India’s biggest developers have struggled to rein in record debt as they grapple with high borrowing costs, dwindling sales and banks’ reluctance to lend.

“The major trend in these markets is that this growth is combined with a capital constrained environment for real estate, mostly driven by government interventions and price cooling measures,” de Poulpiquet said.

“In India and China, there is less opportunity to buy existing assets but greater opportunity to pick the right developer and build to either lease or sell.”

Favorable Demographics

India will have 127 million more working age adults by 2020, while in China, the 470 million adults leaving rural areas for cities will reach a rate of 11 million per year, said de Poulpiquet.

Over the next 15 years, the total global urban space growth will reach about 82,000 square kilometers (31,660 square miles), 47 percent of which will be driven by India and China, he said.

In markets such as Shanghai, the supply of class A office spaces is relatively low while demand is forecasted to remain robust, de Poulpiquet said. In India, the trend is similar where the residential sector continues to offer interesting opportunities, he said.

In Australia, distressed assets sold by European banks which are undergoing deleveraging processes to clean up their balance sheets are attractive, said de Poulpiquet.

In Japan, Morgan Stanley is buying class B office assets in Tokyo and greater Tokyo, he said.

“In many markets globally, including Japan and Australia you can buy class B plus assets, at significant yield differential between your cost of borrowing and the real estate yield,” said de Poulpiquet. “It is a relatively safer investment with good quality yield and return profile.”

Europe will also increasingly offer attractive investments in real estate with all the level of distress in the market, he said. Still, Morgan Stanley remains “cautious” and focused on making “defensive investments” in the region as prices still have some room to fall, he said.

“Overall, we will see slower growth, more volatility but in Europe, it’s neither a doomsday scenario nor in a happy recovery and this will last for a while,” he said.- Bloomberg

Related post:
 Penang residential prices to rise 8%

‘The year of shame 2012’ get any worse in 2013?

THE year 2012 has been labelled “the year of shame'' for the banking industry.

It doesn't matter that such nasty name-calling refers more to the problems at British banks.

Whatever happens in London is bound to attract world interest as it is a major financial centre vying for top spot with New York.

When scandals fall in thick, the tarnish on the banks there becomes even more significant.

To make matters worse, it is now apparent that the Libor interest rate rigging problem is more widespread than originally thought.



Source: Accounting Degree.net (click to link and enlarge)

It was not just a case of a few bad apples causing the rot, said The Guardian.

The problem was cultural, the report said, implying that it would require a wide spectrum of action to overhaul mindsets and unhealthy practices, possibly from ground level.

This requires much work on an international platform as there is no knowing how far and deep the rot has spread.

No doubt, banks in London and New York are the major players in the financial industry, and the other smaller players are feeling the heat as the ripple effect wears on.

As arrests related to the Libor rigging are ongoing, reports liken the revelations and subsequent documentation to a “blizzard.''

A blizzard is a severe snowstorm that often affects visibility, and points to very difficult weather conditions.

In banking and Libor rigging, in particular, this possibly refers to the layers of greed, conspiracy and corruption among the people responsible for conducting the trades.

Going into 2013, more arrests, fines and revelations are expected; the blizzard, therefore, is expected to be stronger.

In view of such a possible scenario, what are the central banks and other banks supposed to do to prevent any international backlash?

Not to underestimate the long-drawn effects of bank weakness, these external parties should quickly cooperate on an international basis to share information, iron out potential problems and try to prevent a big crisis from erupting.

With sound and consistent monitoring, a lot of negative effects can be pre-empted and, thus, avoided.

PLAIN SPEAKING By YAP LENG KUEN The Star

Associate editor Yap Leng Kuen wonders if it is too late to find a shield from blizzards.

Related posts:
The Libor fuss!
HSBC Bank fined $1.92 billion for money laundering


Created by www.accountingdegree.net