What Keeps CROs awake at night?

Transcription

1 What Keeps CROs awake at night? Suresh Raman Country Risk Manager Citibank Berhad RISK MANAGEMENT CONFERENCE NAVIGATING THE NEW PLAYING FIELD PARKROYAL HOTEL KUALA LUMPUR NOVEMBER 213

2 Presentation Coverage The Rise and Rise of Household Debt Where is the debt concentrated? House Price Index where is it headed? Trends with other markets Supply Overhang NBFI Debt what are the implications on the overall Debt? Have NPL rates bottomed out? In Summary

3 HOUSEHOLD DEBT HH Debt Household Debt as % of GDP Source: Bank Negara Malaysia Financial Stability and Payment Systems Report (various) Is the rise in Household Debt likely to stop? Are the tightening measures sufficient to stop the increasing trend? Are we missing anything?

4 HOUSEHOLD DEBT Composition by Product - Q % 45.% 44.5% Product Composition Trends 4.% 4.2% 3.1% 16.8% 6.1% 7.5% 17.6% 44.6% Residential Motor vehicles Non-residential Securities Personal Cards 35.% 3.% 25.% 2.% 15.% 1.% 5.%.% 17.7% 7.4% 5.8% 16.9% 4.5% 3.2% Others Q1 Source: Bank Negara Malaysia Financial Stability and Payment Systems Report (various) Source: Bank Negara Malaysia Financial Stability and Payment Systems Report (212) 45% in Residential Mortgages, but 2% in Unsecured Debt? Why is HH Debt growing especially in Residential Property Loans and Unsecured Personal Loans? Have the guidelines really impacted lending?

5 HPI TRENDS 25 Index Residential House Price Index Q2 MY SG HK US Have we reached the Top of the HPI Curve? Looking at the US HPI Trends, is the Asian Mortgage Bubble about to burst? Malaysia HPI trend since 28 How worried should we be? Source: MY: Valuation and Property Services Department SG: Department of Statistics Singapore HK: HK Rating and Valuation Department US: Federal Housing Finance Agency

6 SUPPLY OVERHANG Number of Units in Supply # in Thousnads 25 Q1 25 Q2 25 Q3 25 Q4 26 Q1 26 Q2 26 Q3 26 Q4 27 Q1 27 Q2 27 Q3 27 Q4 28 Q1 28 Q2 28 Q3 28 Q4 29 Q1 29 Q2 29 Q3 29 Q4 21 Q1 21 Q2 21 Q3 21 Q4 211 Q1 211 Q2 211 Q3 211 Q4 212 Q1 212 Q2 212 Q3 212 Q4 213 Q1 213 Q2 5, 4,5 4, Residential Properties Existing Stock Versus Overhang Units ,5 3, 2,5 2, 1,5 1, Number of units Overhang # in Thousands Supply - Malaysia Supply - Major 4 Cities Overhang - Malaysia Overhang - Major 4 Cities * Source: Valuation and Property Services Department Supply continues to grow. Overhang as defined by incomplete units is not a challenge. Do we understand the challenge posed by vacant units? What risk does that create? What risk does DIBS pose?

7 GROWTH IN NBFI DEBT Household Debt by Lender 5% 3% 2% 8% Banking System Development Financial Institution Treasury Housing Loan Division Other Non Bank Lenders 82% Source: Bank Negara Malaysia Financial Stability and Payment Systems Report (212) Insurance Sector Source: Bank Negara Malaysia Financial Stability and Payment Systems Report (212) Growth rates in Personal Financing for NBFI have continued to grow sharply despite BNM guidelines on responsible finance and cards. Main composition of NBFI debt ( 8%) is through personal financing. This debt not being reported to CCRIS creates a problem of Unknown for Banks. In an economic crisis, what does Risk does this add?

8 IMPAIRMENT RATES 6.% 5.% 4.% 3.% 2.% 1.%.% Impairment Rate Trends q1 Personal Financing Cards Residential Mortgages Total Banking Loans Total Household Debt Source: Bank Negara Malaysia monthly statistics Have impairment rates bottomed out? How much of the NPL reduction is due to the base effects? In a crisis, with impairment rates close to 28, what impact does the higher volume create?

9 IN SUMMARY Household Debt position is a source of concern. New measures by BNM are definitely in the right direction and will help in the long run. Real Estate Market needs to be watched in 214 post the new measures on RPGT / DIBS and Refinancing. CCRIS Information needs to be augmented with NBFI Debt so that the full picture on debt leverage is available to all lenders. NPL trends are comforting but should not become complacent as the combination of base effect and good economy can easily be reversed in a downturn. Stay Vigilant Be Prudent!