Maybank Tower is pictured at Jalan Pudu in Kuala Lumpur April 24, 2020. The rating agency said banks’ earnings declined significantly in the second quarter , dragged down by hefty modification losses and pre-emptive provisions, as well as markedly thinner net interest margins . — Picture by Ahmad Zamzahuri
The average pre-tax return on assets and return on equity of eight selected local banks fell to an annualised 0.7 per cent and 6.8 per cent, respectively, in the same period. In addition, the recently announced targeted extension of the loan moratorium beyond September for selected borrowers will also trigger another round of modification losses, although to a much smaller degree, Wong added.
“Despite the still benign GIL ratio, banks have been proactively building up their provisions in anticipation of heightened defaults next year.