Abstract
Although Malaysia’s economy retained its strong growth momentum in Q208
with real GDP expanding
by 6.3% year-on-year (y-o-y) to beat a consensus
forecast of 5.9%, economic activity witnessed a
significant slowdown,
having recorded growth of 7.1% in the first three months of the year. From
here,
we expect it to continue to slow throughout H208 as the economy
grapples with an increasingly hostile
external environment and elevated
inflation, and we therefore maintain our full-year growth forecast for
2008 of 5.5%.
This report is being written at a time when the global
financial crisis, which arose as a result of the
evaporation of inter-bank
liquidity, has moved into a new phase. Stock market participants appear,
reasonably, to have taken the view that the policy responses taken by
governments, central banks and
multi-lateral institutions will be
sufficient to prevent a total collapse of the global financial system.
Instead, stock market participants are focusing on the impact of a near-global
recession on the earnings of
non-financial companies.
The number and
size of stand-by facilities agreed by the IMF since early October supports our
view that,
of the emerging markets whose commercial banking sectors are
surveyed by BMI, the countries of
Central and Eastern Europe are those
whose economies are most at risk of suffering adverse affects as a
result
of the global financial crisis. This is partly because the macroeconomic
imbalances are relatively
severe and partly because the Central and
Eastern European countries are more directly affected by the
brutal
recession that is unfolding in wealthier member states of the EU.
As yet,
it has not been possible to collate hard numbers, for most of the countries
whose commercial
banking sectors are surveyed by BMI, that clearly
quantify the impact of the global financial crisis on the
banks. As we
explain in the section that discusses changes that we are making to the
report, we again
include a lengthy essay which attempts to identify the
key issues. In essence, in the emerging markets –
and, indeed, the
developed countries – of the Asia-Pacific, commercial banks appear well
placed to deal
with the crisis. The same is, broadly, true of commercial
banks in the various countries of the Middle East
and North Africa. Latin
America, Chile, Brazil, Mexico and Colombia appear better placed than
Argentina, Venezuela, Bolivia and Ecuador. South Africa’s situation
appears to have much in common
with that of Brazil. In contrast, Nigeria
faces some of the same challenges as those that confront
Venezuela. The
positions of most countries in Central and Eastern Europe, however, are
alarming.
From Q209, we will include data that pertains to late 2008 and
extend forecasts out to 2013. We will also
incorporate much greater
discussion of the various protagonists in each country’s commercial
banking
sector and a number of new features. We believe that the figures
we compiled in mid-2008 provide
insights as to how the various commercial
banking sectors will fare in the current, extremely uncertain,
climate. We
have, therefore, left them essentially unchanged.
The figures on the
tables above provide a snapshot of the banking sector in Malaysia prior to the
onset of
the global financial crisis. To place the figures in context, it
may be useful to bear in mind certain aspects
of the 59 countries whose
banking sectors are currently surveyed by BMI. Across this sample, the
median
growth in assets in local currency terms was 21.3% (in Colombia),
the median loan growth was 21.6% (in
India) and the median growth in
deposits was 17.9% (in Brazil).
On their own, the ratios of loans to
deposits, assets, and GDP mean little. However, they can provide
useful
hints when combined with other data. Across the 59 countries, the median
loan/deposit ratio is
92.3% (in Greece), the median loan/asset ratio is
56.0% (in Poland) and the median loan/GDP ratio was
63.9% in India.
As
in previous reports, we include a SWOT analysis for Malaysia. The banking
sector is strong and, over
the long term, is well placed to consolidate
its leadership in Islamic banking. In the short-to-medium term,
though,
Malaysia’s banking sector stands out for its slow growth by the standard
of other countries in the
region.
Since Q108, we have calculated, on a
consistent basis, a Commercial Bank Business Environment Rating
(CBBER)
for each of the 59 countries surveyed. The CBBER includes an assessment of the
limits of
potential returns. It does this by taking into account the size,
growth potential and bancassurance potential
of the banking sector, as
well as aspects of the economy in 2007. The CBBER also depends on an
assessment of the risks to the realisation of potential returns. This reflects
BMI’s assessments of overall
country risk, together with the
regulatory and competitive environment.
Malaysia’s overall CBBER is
67.5. Within the limits to potential return, the banking market structure
and
the country structure are almost evenly rated, with scores of 67.5 and
62.0 respectively. Within the risks
to the realisation of potential
returns, the banking elements and the country elements are also evenly
rated, with respective scores of 76.0 and 69.9.
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