Maybank Estimates Modification Loss At RM1 Billion From Hire Purchase Moratorium

maybank
(Image: The Star)
maybank
(Image: The Star)

Maybank has estimated that it has incurred approximately RM1 billion worth of day-one modification loss from the six-month moratorium of hire purchase loans, which will be reflected in the second quarter ending on 30 June 2020.

A one-day modification loss can be defined as a one-off cost incurred when a bank opts for a particular alternative, compared to what they could have earned if they chose another method.

Prior to this, Maybank – through its investment arm – had already noted that the modification loss for the banking industry as a whole will amount to about RM4.4 billion. This is attributed mainly to the fact that banks are unable to collect additional interest on hire purchase installments during the moratorium period.

maybank investment bank
(Image: The Edge Markets)

Maybank also announced last week that it will not be extending the ongoing moratorium past its deadline. The aid, which began in April, is slated to end by September. However, Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz said that the government will reach out to banks about the possibility of extending it in a targeted manner.

The president and chief executive officer of Maybank, Datuk Abdul Farid Alias, further stated that the bank will also do their best to mitigate the potential financial impact from other banking customer segments. He said that at present, more than 70% of Maybank’s loan book is under some form of financial relief aid, including the automatic moratorium or rescheduling and restructuring programmes.

maybank datuk abdul farid alias
(Image: The Star)

“For the SME segment, around 88% of our SME outstanding loans are under the six-month moratorium,” said Datuk Farid. He also clarified that Maybank has approved up to RM2.1 billion of BNM’s Special Relief Fund (SRF) aimed at alleviating short-term cash flow problems faced by SMEs. This amounted to a 77% approval rate from the applications that it received.

Meanwhile, the total financing for SMEs (including those under the SRF) up until May stands at RM4.9 billion, scoring an 85% approval rate.

Aside from the SRF and moratorium, Maybank has also extended other financial aid to its various customer segments to help them in this challenging economic climate. These include credit card repayment programmes, insurance premium payment deferrals, and fee waivers for selected services, such as for interbank ATM withdrawals.

(Source: The Edge Markets)

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