RAM says Maybank 's gross impaired loans ratio has risen over the years due to "weakness in specific corporate borrowers domestic & foreign " - Maybank's Genting HK denial inconsistent with RAM analysis

by Ganesh Sahathevan 

RAM Ratings noted in a Maybank ratings update dated 27 December 2021: 

Weakness in specific corporate borrowers, both domestic and foreign, have driven up the Group’s gross impaired loans (GILs) over the years. Despite the heightened credit risk environment, Maybank’s GIL ratio was a lower 1.9% as at end-September 2021 (end-December 2020: 2.2%), helped by relief measures across the region as well as the write-off of several lumpy exposures.

RAM  Ratings reaffirmed Maybank's AAA rating and the statement above seems to be a classic case of kitchen sinking. In any case, it reveals a lender  whose special relationship with  favoured customers has led it into loss.  

It adds to this writer's opinion that Maybank's Genting HK press release reveals more than Maybank expects it will rebutt (see story below). 

Monday, January 24, 2022

Maybank provides no basis to allay "baseless" fears of Genting HK related losses , and its denial adds to the fears

by Ganesh Sahathevan

It has been reported that  Maybank has issued a press statement "slamming" reports that Maybank will suffer signifiant losses from the likely liquidation of Genting HK. 

Maybank says the reports of its  losses are "baseless" , but its press release raises many bases of concern.

Maybank states:

“While we do not comment on our exposure to customers or alleged customers owing to confidentiality obligations, Maybank would like to re-enforce that it observes strict accounting treatment related to provisioning and impairment of loans, as per International Financial Reporting Standard and Malaysian Financial Reporting Standard requirements, and these accounting treatment are also subject to comprehensive reviews by our external auditors and regulators,” the statement said.

Maybank has a rigorous asset quality monitoring process, whereby vulnerable borrowers are identified and managed accordingly from the onset of any potential asset quality weakness.

The above statement is unfortunately less than re-assuring. 

First, review of Maybank's financial records by external auditors for compliance with accounting standards is not very likely to reveal any problems with loan quality, unless those problems have been disclosed in Maybank's own records. 

Second, it is highly unlikely that Genting and its related businesses would have been considered "vulnerable borrowers" by any bank in Malaysia, including Maybank. Consequently, it is not likely that there would have been any specific provisions made for any loss on loans to Genting HK.  

A simple "no exposure" would have sufficed, but Maybank chose instead to go on an offensive. It can now provide answers to issues it has caused to arise.

TO BE READ WITH 




Maybank: Allegations of financial trouble baseless

Tuesday, 25 Jan 2022


“With regard to your query on recent news articles suggesting that Maybank is one of the three Malaysian banks that will face major financial trouble owing to exposure to Genting Hong Kong, Maybank would like to state vehemently that these allegations are baseless,” Maybank said said in a written reply to query on the issue.


KUALA LUMPUR: Malayan Banking Bhd (Maybank) says allegations that it will face major financial trouble owing to exposure to Genting Hong Kong are baseless.

“With regard to your query on recent news articles suggesting that Maybank is one of the three Malaysian banks that will face major financial trouble owing to exposure to Genting Hong Kong, Maybank would like to state vehemently that these allegations are baseless,” it said in a written reply to query on the issue.


It was reported that three Malaysian banks’ profits, including Maybank, are set to take a major hit as trouble looms over cruise operator Genting Hong Kong – a major Asian corporate casualty of the Covid-19 pandemic. The other two banks are CIMB and RHB Bank Bhd.

The report by Singapore’s Straits Times said that these three banks are among some the chief unsecured creditors of Genting Hong Kong, with a combined exposure of US$600mil (RM2.5bil).


Genting Hong Kong’s liquidation filing came just a week after its German shipbuilding subsidiary MV Werften went into insolvency, a development that triggered cross-defaults for the entire group’s various financing arrangements amounting to more than US$2.7bil (RM11.31bil), it reported.

“While we do not comment on our exposure to customers or alleged customers owing to confidentiality obligations, Maybank would like to re-enforce that it observes strict accounting treatment related to provisioning and impairment of loans, as per International Financial Reporting Standard and Malaysian Financial Reporting Standard requirements, and these accounting treatment are also subject to comprehensive reviews by our external auditors and regulators,” the statement said.

Maybank has a rigorous asset quality monitoring process, whereby vulnerable borrowers are identified and managed accordingly from the onset of any potential asset quality weakness. — Bernama