Recent Bank Negara statistics indicate that foreign banks have been losing market share on Malaysian turf. (thestar.com.my
According to TA Research, the combined net interest income (NII) of Standard Chartered, OCBC, Citibank and UOB’s Malaysian operations have contracted for five straight quarters. “While we believe loan yields have held steady as some of these foreign banks likely shied away from competition, lower interest income from other assets along with the rising cost of funds contributed to softer overall NII,” TA said in a report.
“That said, we note that combined loan growth for these four players has eased. Accelerating at a slower pace than the eight anchor banks combined as well as the industry, the foreign banks have been losing market share,” it added. However, TA also noted that these foreign banks have been growing more business and corporate-based loans. “Unlike the local players, the foreign banks appeared to be increasingly cautious on the small and medium enterprises as well as the consumer segment, with loans in both declining at a faster pace than the local players and Bank Negara,” it said.
TA said the most notable decline was the consecutive year-on-year (y-o-y) contraction that was reported in credit card advances and hire purchase loans by the foreign players. “We note that these foreign banks have been growing in the residential and non-residential space — albeit not too aggressively,” the research house said.
The report also noted that the asset quality of the four foreign banks that it was tracking had been holding up quite well. “Combined, total gross impaired loans fell by close to 2% y-o-y in the first quarter after rising for three straight quarters. The gross impaired loan ratio appears to have stabilised at 2.5% since the second half of 2015,” it said. “In comparison, the eight local banks have been registering double-digit increases in gross impaired loans. A bulk of this, however, is attributed to the weakening in some of the banks’ overseas operations such as in Indonesia, Thailand and Singapore,” TA added.
The research house also said that by country, the impaired loans for the anchor banks’ operations in Malaysia remained “healthy and in contraction mode”. Meanwhile, among the foreign banks, average loan loss provisions for Standard Chartered, OCBC, Citibank and UOB remained in descent in tandem with its peers, slipping to 89.5% from 93.4% a year ago.
Among the four foreign banks that TA tracks, UOB has the highest market share in terms of loans, at 5%, followed by OCBC, with a 4.8% market share.
“Following in third place we believe is HSBC, although we have been unable to verify with the latest financial accounts. In the meantime, Standard Chartered commands some 2% share of the loan market — a decline compared to 2.4% a year ago, while Citibank’s market share stood unchanged at 1.7%,” TA said.