KUALA LUMPUR (April 14): CIMB Securities believes banks may consider targeted loan relief for exporters and suppliers hit by external tariffs, similar to support given during the Covid-19 pandemic.

Back then, rescheduled and restructured loans were not classified as impaired, helping borrowers and reducing wider economic impact.

“This exemption likely helped businesses weather the storm during the pandemic, and could be beneficial again by providing additional time to adjust to the current external tariff situation,” the research house said in a note on Monday.

Prior to the pandemic, gross impaired loans of the banking industry amounted to RM27.9 billion, with a corresponding gross impaired loans ratio of 1.57%. This figure peaked at RM36.8 billion in November 2022, pushing the ratio to 1.82%. 

CIMB Securities believes that relief programmes play a key role in preventing further rise in impaired loans.

If the same approach is applied again this time, CIMB Securities said banks’ valuations will not decline to the trough levels observed during the pandemic, when their price-to-book valuations dropped to 0.3 times to 0.5 times.

Unlike during the pandemic, when 70% to 80% of loans were initially under an automatic moratorium and later dropped to 30% on an opt-in basis by end-2020, the current exposure is much lower. As a result, the impact is unlikely to be as widespread — unless external tariffs worsen significantly.

A previous report by CIMB Securities estimated that export-related loans accounted for just 2.8% of total loans in Malaysia.

Going forward, it expects banks’ share prices to continue to trade range-bound in the next few months, pending further clarity on the external tariff situation. It has maintained its 'neutral' rating for the sector.

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US tariffs may weigh on Malaysian banks’ loan growth, raise provisions — CIMB Securities