Domestic banks stand to gain from PR1MA flexible scheme

Direct beneficiaries will be Ambank, CIMB, Maybank and RHB Bank, encouraging them to lend more to the residential property segment which at the moment constitutes 23.5 per cent of their combined loans. — Bernama photo

Direct beneficiaries will be Ambank, CIMB, Maybank and RHB Bank, encouraging them to lend more to the residential property segment which at the moment constitutes 23.5 per cent of their combined loans. — Bernama photo


KUCHING: Analysts anticipate minimal earnings impact from Perbadanan PR1MA recently introducing a special end-financing scheme called the Skim Pembiayaan Fleksible (SPEF) created exclusively for PR1MA homebuyers.


Kenanga Investment Bank Bhd’s research team (Kenanga Research) believed this scheme would undoubtedly benefit local banks such as AMMB Holdings Bhd (AmBank), CIMB Group Holdings Bhd (CIMB), Malayan Banking Bhd (Maybank), and RHB Bank Bhd (RHB Bank) as it encourages them to lend more to the residential property segment.


The new scheme is established in collaboration with Bank Negara Malaysia (BNM), Employees Fund Provision (EPF), and four local banks, namely AmBank, CIMB, Maybank and RHB Bank.


However, Kenanga Research pointed out that the banks might see minimal impact on its earnings from this scheme.


“On hindsight, the direct beneficiaries will be Ambank, CIMB, Maybank and RHB Bank, encouraging them to lend more to the residential property segment which at the moment constitutes 23.5 per cent of their combined loans (based on third quarter of 2016 figures).


“However, we are neutral on the impact. As the target for 2017 involves 15,000 units only (assuming an average price of RM350,000 to RM400,000 per unit) at 95 per cent financing, we estimated the banks will fork out between RM4.9 billion to RM5.7 billion in new loans or an extra 2.1 per cent to 2.4 per cent to the aggregate of their total outstanding loans.


“Impact on asset quality, on the other hand, is also expected to be benign. Assuming a 20 per cent default rate, we estimate that the gross impaired loan (GIL) ratio of the combined banks will increase by 10 basis points (bps) to 2.57 per cent on average,” it explained.


Additional details of the scheme include a step-up financing and the step-up financing with EPF Account 2 withdrawal options where for the first five years, only the interest needs to be paid and the principal amount payments kicks in only from the sixth year onwards, interest fee for this new scheme would be higher at 4.75 per cent than the average conventional loan of 4.45 per cent, and PR1MA targets 15,000 units to be sold in 2017.


Meanwhile, Kenanga Research noted that CIMB would likely receive the bulk of the financing for this new PR1MA scheme.


“While details are not clear on how the targeted 15,000 units will be carved out among the four banks or who or how among them will get the bulk of financing scheme, we believe that CIMB will be able to acquire the most,” it opined.


It pointed out that CIMB’s exposure to the residential property segment is the highest among the four listed, increasing by 13bps since 1Q16 although its average lending yields (ALR) is the highest in the industry at 5.16 per cent in 3Q16 (compared with the industry’s 4.55 per cent), implying higher appetite for mortgage loans.


Maybank’s exposure to the property segment has been trending downwards despite the easing of its lending rates implying lower appetite in this segment, it said.


Overall, Kenanga Research  said with minimal impact to the industry and pending the release of the banks’ quarterly results this month, it maintained a ‘market perform’ rating on most of its banking stocks except CIMB which it pegged an ‘outperform’ rating.