-  The banks have indicated that the longer-term tenured loans may not be a significant portion of total loans. This is in response to Bank Negara Malaysia (Bank Negara) new measures which was announced on 5 July 2013. To recap, the measures are:- (1) Maximum tenure of 10 years for financing extended for personal use; (2) Maximum tenure of 35 years for financing granted for the purchase of residential and non-residential properties; (3) Prohibition on the offering of pre-approved personal financing products. We believe the measures came as an initial surprise but latest indications show that the impact to loans may not be significant.

-  AFG hints that the portion of total loans above 35 years tenure is a very small percentage of its overall loans. This is because generally the industry has started to introduce longer term tenure loans more than 30 years only in the last two to three years. In addition, for AFG, there is an overall cap of maximum age of 70 years for the loans. There is no impact on AFG in terms of personal loans, as it has stopped providing co-operative loans two years ago.

-  For CIMB, there is generally already maximum tenure of 40 years or 70 years for age, whichever is lower, for the residential mortgage loan, while for non-residential mortgage, the maximum tenure is 30 years. For personal loan, the maximum tenure is 5 years, but for government civil servant loans, the tenure is up to 20 years, although we believe this should be a small portion of CIMB’s loans. For HLBB, we estimate the maximum personal loan tenure is 5 years. We estimate that HLBB’s portion of residential mortgage and nonresidential mortgage loan with tenures above 35 years is very small, very likely at less than 1%.

-  As for Maybank, we estimate that the portion of property loans (both residential and onresidential mortgage) is less than 10% of its existing portfolio. Generally, Maybank sets a similar limit of up to 40 years tenure for property loans or maximum age of 70 years. For Public Bank, it does not foresee any impact from non-residential mortgage loans because the maximum tenure is only 25 years. In terms of the personal loan portion, PBB has been winding down the personal loans given to government servants from 3.6bil early last year to 2.5bil. Hence, new measure on personal loan is not expected to be a major impact for PBB. For PBB’s residential mortgage loans, the maximum tenure is 40 years or 70 years old, whichever is lower. However, the portion of residential mortgage loans with tenures above 35 years is very insignificant.

-  For RHB Cap, we estimate that personal loans with tenures more than 10 years is minimal at about only 5% of its total personal loan portfolio. RHB has not been providing mortgages with tenures more than 35 years as the company’s maximum tenure for both residential and non-residential mortgage is 35 years in the recent past. Thus, the existing longer-tenure loans make up only a small portion of its total loans portfolio. We maintain NEUTRAL on the sector.

Source: AmeSecurities