Domestic banks reported a marked decline in earnings from domestic banking activities during the first half of the year weighed down by further margin compression and higher provisions for credit losses.
Banks were also impacted by a one-off contract modification loss due to the waiver of additional interest charges for hire-purchase loans and fixed-rate Islamic financing under the repayment moratorium measures. This further compressed narrowing margins from successive Overnight Policy Rate cuts. BNM also said the overseas operations of domestic banking groups experienced a decline in profitability for the first half of 2020, as banks in the region were similarly affected by slower economic activity as a result of Covid-19 containment measures and a deterioration in asset quality.
Overall, all banks remained well capitalised throughout the first half of 2020, with aggregate capital buffers amounting to RM121.6 billion as at June 2020.
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