PETALING JAYA: Ram Ratings said Malaysian banks had paid out higher dividends in the fourth quarter against the backdrop of a cloudy outlook on loan growth and build-up of excess capital.
The dividend payout ratios of domestic banking groups with financial years ending on 31 December ranged from 29% to 88%, markedly higher than the 19% to 77% in the previous year.
Financial Institution Ratings co-head Wong Yin Ching said for 2020, loan growth is likely to clock in below that of 2019.
“The Malaysian banking sector wrapped up 2019 with a muted 3.9% loan expansion – a multi-year low. Already having had to contend with the US-China trade tensions and anaemic global growth, the global Covid-19 outbreak and domestic political uncertainties are expected to further constrict credit demand,” she said.
She also said the softer projected loan growth amid the still-strong asset quality of the domestic banking system means lighter capital needs, which will allow banks to distribute some of their excess capital to their shareholders.
“Banks’ capital positions are envisaged to remain solid after their dividend payments,” said Wong.
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.
Bank Negara Malaysia’s recent release of the framework for domestic systemically important banks (D-SIBs) and the inaugural list of D-SIBs has also removed any uncertainty pertaining to additional capital requirements for banks.