Malaysian Islamic Banks Show Greater Growth Stability From Indonesian Counterparts

KUALA LUMPUR, May 9 (Bernama) -- Islamic banks in Malaysia show greater growth stability and better asset quality compared with its Indonesian counterparts, despite the similar macroeconomic headwinds faced by both systems, Moody's Investors Service said. In its recently-released report, Moody's noted that banks in Malaysia and Indonesia were recording slower growth in Islamic financing, reflecting the broader slowdown in their respective economies. However, the report showed that the slowdown in Indonesia was far more pronounced, with growth in the Islamic financing sector slowing sharply to below 10 per cent year-on-year in 2014 and 2015 from an excess of 50 per cent in 2011. Moody's Vice-President and Senior Analyst Simon Chen said the divergence between the two systems was notable, considering the fact that the two economies had exhibited similar economic and credit growth trends. "The out performance of Malaysian Islamic banks against their Indonesian counterparts in terms of asset growth reflects to a large part the Malaysian banks' more established franchises, deeper market penetration, and long-standing regulatory support," he said in a statement Monday. Moody's report also pointed out that in 2015, the Malaysian Islamic banking sector accounted for 27 per cent of total banking system assets versus 5.0 per cent in Indonesia. Apart from the larger scale of Islamic banks in Malaysia, it said such banks in the country also demonstrated a more diversified portfolio mix compared with that of their counterparts in Indonesia. As a result, Moody's said the asset growth and asset quality of Islamic banks in Malaysia and Indonesia would continue to diverge. -- BERNAMA