Malaysia Banks:Tough 2015 - Takeaways from meeting with CIMB and Maybank CFOs

We met Maybank Group CFO, Rafique Merican, CIMB Group CFO, Kenny Kim and CIMB Group CRO, David Thomas earlier in the week for an update. Message from both the banks is similar - 2015 is going to be tough. The focus is shifting away from loan growth towards costs,amidst very tight liquidity and declining NIMs. On asset quality, both banks have certain issues (Niaga for CIMB and certain large exposures for MAY) but we sense a degree of denial on implications for broader asset quality from a weaker macro.

    The industry is facing massive liquidity squeeze (see Fig.1), resulting in NIM compression (see Fig. 2). The competition for MYR funding is coming from LCR requirements starting June, and due to shift towards non-MYR assets, we believe. Despite being large banks, both CIMB and MAY are not immune from those shifts, and unless asset pricing becomes more disciplined, we do not see NIMs stabilizing anytime soon.Managements broadly concurred with this view.