KUALA LUMPUR: Malayan Banking Bhd (Maybank) is expecting its asset quality to improve in the financial year ending Dec 31, 2017 (FY17) after restructuring and rescheduling loans that could potentially go bad, but remains cautious about its oil and gas (O&G) related borrowers.

At a press conference after the group’s annual general meeting yesterday, chief financial officer Datuk Amirul Feisal Wan Zahir said Maybank is expecting a lower net credit charge-off rate for FY17, a measurement the bank uses to gauge asset quality.

Net credit charge-off rate is the percentage of loans a bank believes it is not able to recover.

“We have some kind of guidance called [net] credit charge-off, where in the last year we did 62 basis points (bps). For 2017, we’re guided around 50bps. Right now, our gross impairment loan ratio is about 2.28%. Going forward, we will still remain cautious and we are still looking at some stress situations, especially from the oil and gas [sector],” he said.

Amirul Feisal recalled that Maybank restructured and rescheduled some of its “vulnerable” loans back in FY16, and hopes that these customers would stick to the new repayment schemes.

“What we did in 2016 was [to] proactively approach our customers who might be vulnerable and require some flexibility. We helped them by doing restructuring and rescheduling for the loans. Once we do that, we have to impair under Bank Negara Malaysia’s rules,” he said.

Maybank’s net impairment losses grew 50% to RM3.02 billion in FY16 from RM2.01 billion a year ago.

“After the impairments, and if they (the borrowers) continuously perform for a period of six months, we can actually take them (their loans) off from the impairment. What we hope to happen is, as some [additional loans] may have to be restructured and rescheduled [for FY17, adding to impairments], some [others] may come off too,” Amirul Feisal said.

Asked if Maybank would be making a lower provision for FY17, group president and chief executive officer Datuk Abdul Farid Alias merely said management will still prepare for the worst. “It is all relative; we hope for the best and prepare for the worst,” he said.

But what’s more likely is an increase in provision for Maybank — Malaysia’s largest lender by asset size — in FY18, due to the adoption of the Malaysia Financial Reporting Standard (MFRS) 9 come Jan 1 next year, said Abdul Farid.

“The one-time provision is going to result in higher provisions; that is a certainty. But we can take away the one-time charge from the capital that we have; that’s why our capital is getting higher over the years. We have been preparing for that,” he explained.

MFRS 9 is a requirement for local banks, based largely on a forward-looking expected credit loss impairment model, and is expected to increase the provision amount required, which could potentially affect the profitability of banks.

Maybank’s share price slid one sen or 0.11% to RM8.94 yesterday. The counter has gained 11.61% since Jan 3 this year. The latest closing price gives it a market capitalisation of RM91.14 billion.