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    Posted December 22, 2013 by
    Kuala Lumpur, Malaysia

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    World Bank praises M'sian banking sector

    The World Bank has given a vote of confidence to Malaysia’s banking sector, saying it is poised for further growth next year, with strong prospects and profitability.

    Jose de Luna Martinez, the bank’s senior financial economist, financial and private sector development vice-president, said the World Bank considered Malaysia a success story in terms of financial inclusion and quality of banking regulations and supervision.

    He said Malaysia was on the path to becoming a high-income nation by 2020 and that the financial system would play a key role in achieving this aspiration.

    “Malaysia’s banking system has grown rapidly in the past years.

    “The economy is expected to grow at a rate of 4.5% to 5% in 2014, which will provide opportunities for the expansion of banks, both in the domestic and regional marketplaces,” he told Bernama.

    He said the World Bank was confident of Bank Negara’s measures to handle potential risks effectively.

    Malaysia was ranked No. 1 in the World Bank’s Doing Business publication in terms of the ease of getting credit by small and medium enterprises.

    Meanwhile, Moody’s Investors Service, in its latest note, gave a stable outlook on Malaysia’s banking system for next year.

    Its operating environment had been rated stable despite concerns over rising household borrowings, it said, adding that banks in the country faced little liquidity pressure as they largely funded their books from deposits.

    Profitability would also remain stable for banks as loan growth and fee income would be strong enough to offset margin pressure in the system, the ratings agency said.

    Alliance Research, in its note, said the sector’s outlook remained bright going forward, while at the same time reiterating its “overweight” call.

    The research house said the underlying fundamentals of the domestic banking sector remained solid and that foreign shareholding levels were at the lower end of historical range.

    It said the ongoing merger and acquisition theme to spice up the sector next year and valuations of selective banking stocks were decent at present level.

    “We remain optimistic of the banks’ earning prospects next year, supported by stronger 2014 gross domestic product growth, decent loan growth of 9%, rising non-interest income and strong asset quality,” it said.

    This year, Malaysia’s banking industry performed well amid volatilities in the global market.

    Among the major developments, Bank Negara had on July 5 introduced three new measures to curb Malaysia’s rising household debt: reducing the maximum tenure for personal loans to 10 years, restricting home loans to no more than 35 years, and prohibiting offers for pre-approved personal loans.

    On Nov 15, in conjunction with the release of third-quarter economic figures, Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz said the measures taken were working with local households piling on debts at a slower rate.

    The central bank announced that the rise of the household debt-to-gross domestic product ratio had eased slightly to 2.5% during the quarter, compared with 3.2% in the preceding period.

    Meanwhile, early in the year, Alliance Research said the market had speculated on a potential privatisation of RHB Capital Bhd by its major shareholders.

    “Although the news on that front has dissipated, we would not be surprised if there is a re-emergence of merger and acquisition (M&A) newsflows on this banking group, in view of the relative underperformance of its share price and the group’s attractive valuation,” it said.

    The ongoing M&A news to excite the banking sector, it said, would be the acquisition of Hwang DBS (M) Bhd by Affin Holdings Bhd, with the deal expected to be finalised in the first quarter 2014. - Bernama

    Photograph: Malaysia is a success story in terms of financial inclusion and quality of banking regulations and supervision, says the World Bank. (File pic shows a train passing the central bank building in Kuala Lumpur.)

    Source: The Star (On-Line), Malaysia

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