BIMB Integrated Annual Report 2019

Banks in Malaysia are expected to face a challenging operating environment following the COVID-19 pandemic and are expected to register slower loans growth compared to 2019 given the challenges. However, local banks declared higher dividend pay-outs during the fourth-quarter 2019 financial results and their capital positions are envisaged to remain solid. While measures such as the six-month moratorium on loan repayments will have an impact on revenues and provisions, they are viewed as revenue deferment rather than revenue loss. 107 BIMB HOLDINGS BERHAD 199701008362 (423858-X) Shareholders’ Information Financial Statements Additional Information Disclosure Summary economic fallout and provide sizable support to households and businesses. The expansionary monetary policy, measures such as the moratorium on loan payments, discounts on utilities and other such demand management policies are aimed to steer the country’s economy to a more sustainable path going forward. Judging from the large-scale reversal in the global equities market alongside the massive interest rate cuts and quantitative easing measures as well as a series of fiscal injection, global growth is expected to contract. Consequently, major economies are preparing themselves with unconventional policy responses that will ensure more cash will be distributed into the hands of the public. If history is any guide, a coordinated policy response would yield a V-shape recovery as was the case during the Global Financial Crisis in 2008 and 2009. Only time will tell. Consequently, Malaysia’s GDP growth is expected to be muted at between -2.0% and +0.5%, according to BNM. Financial Sector to Face Slower Growth but Islamic Finance Contribution to Grow Banks in Malaysia are expected to face a challenging operating environment following the COVID-19 pandemic and are expected to register slower loans growth compared to 2019 given the challenges. However, local banks declared higher dividend pay-outs during the fourth-quarter 2019 financial results and their capital positions are envisaged to remain solid. While measures such as the six-month moratorium on loan repayments will have an impact on revenues and provisions, they are viewed as revenue deferment rather than revenue loss. The domestic banking industry’s Common Equity Tier-1 capital and total capital ratios stood at a relatively high 13.8% and 17.9%, respectively as at end-December 2019 as they have been building up capital buffers in line with Basel III requirements. Fitch Ratings opines that the contribution of Islamic financing to Malaysian banking system loans is expected to rise further, supported by the regulatory backdrop that provides a level playing field as banks continue to promote Islamic products. Islamic banks’ loss-absorption buffers are envisaged to provide adequate support to withstand the near-term challenges. The Takaful sector is growing faster than conventional insurance sector and is poised to sustain its robust growth curve, taking into account the low penetration rate, rising urbanisation, escalating medical costs, ageing population and increasing consumer awareness.