KUALA LUMPUR: RAM Rating Services Bhd (RAM Ratings) says its analysis shows that banks operating in Malaysia are well positioned to weather looming asset quality challenges arising from the Covid-19 pandemic and plunging oil prices.

This is based on its Banking Scoreboard, which serves as peer comparisons of key Malaysian banks as it juxtaposes the 16 largest commercial banks in the country. The banks are assessed and ranked based on more than 25 metrics, from asset quality to profitability, funding, liquidity and capitalisation.

“The Banking Scoreboard shows that the asset quality of banks remains resilient amidst the weaker macroeconomic backdrop. Public Bank, Hong Leong Bank and Citibank stayed in the top three spots in terms of gross impaired loan (GIL) ratio, with all three banks reporting a commendable GIL ratio of less than 1% as at end-September 2019.

“The former two continued to see prudent and disciplined underwriting standards paying off while the latter benefitted from changes in impaired loan classification policy to be in line with industry norms,” RAM Ratings said in a statement yesterday.

It also noted that the common equity tier-1 (CET-1) capital ratios of all the banks in its sample were above 12% as at end-September 2019, which is significantly higher than the minimum regulatory requirement of 7% and the more stringent capital requirements imposed on those designated as domestic systemically important banks (Maybank and CIMB: 8%; Public Bank: 7.5%).

It has also examined how Islamic banks compare against one another using its Islamic banking scoreboard. The scoreboard indicates that HSBC Amanah, Public Islamic and Hong Leong Islamic reported much higher shares of retail deposits relative to peers, reflective of the banks’ strong consumer focus.

“Islamic banks belonging to larger banking groups have a greater proportion of retail deposits to total customer deposits when juxtaposed with stand-alone Islamic banks. Aiding this is the ability of these entities to leverage on the extensive branch networks and other distribution channels of their conventional parents.

“As part of larger banking groups, the banks are also able to draw on strong parental funding support in the form of restricted profit sharing investment accounts and interbank funding,” RAM Ratings added.