Evaluation Of Performance Of Malaysian Banks In Risk Adjusted Return On Capital (Raroc) And Economic Value Added (Eva) Framework

As Malaysian banks step into Basel-III era, a close look at their performance on risk adjusted basis using RAROC and EVA would throw significant light on their relative strengths and weaknesses. Post restructuring during 1999–2000, the regulatory framework of Bank Negara Malaysia (BNM) throughout 2001–2010 was mainly centered on capitalisation, risk management and governance practices in banks. Financial Sector Blue Print is viewed as the reference framework for growth of banks in the current decade. Though numerous studies have evaluated the performances of Malaysian banks in terms of efficiency and productivity gains before and after the merger and also at various phases during the last decade, no study has so far been reported to evaluate their performances using the above framework. This paper intends to fill up this gap. The period covered is 2001 to 2013. Findings of this paper would be of keen interest to the policy planners, investors and researchers alike

Financial Health: Examining the Ability of Malaysian Household in Servicing Their Debts

This study is motivated by the persistent increased in household debts among Malaysian. The increasing trend of household debts raised concerns about the ability of the households to service their debts; especially when bankruptcies rates among Malaysian increase rapidly. Hence, this study seeks to examine the ability of the households in servicing their debts by looking at the association between loan features and types of household loans, and the post-loan debt service ratio. Using estimated logit model, the results show that household loans are associated with different loan features, which also indicates the ability condition of the household to service their debts. The post-loan debt service ratio shows that borrowers of certain types of loans have difficulties or less ability to service their debts. Further, the socio-demographic factors present the association of the borrowers’ characteristics with types of household loans. The results show that the ability to repay debts is different between gender, races, education and employment. The study is conducted on households in three northern states of Malaysi

Malaysian residential mortgage loan default: a micro-level analysis

Purpose – This study investigates factors contributing to residential mortgage loans default by utilizing a unique dataset of borrowers’ default data from one of the pioneer lending institutions in Malaysia that provides home financing to the public. Studies on mortgage loan default have been extensively examined, but limited studies utilize the individual borrower’s data, as financial institutions generally hesitant to reveal their customers’ data due to confidentiality issue.Design/methodology/approach – This study uses logistic regression model to analyze 47,158 housing loan borrowers’ data for the year 2016.Findings – The findings suggest that male borrowers, Malay and other type of ethnicity, guarantor availability, loan original balance, loan tenure, loan interest rate and loan-to-value (LTV) ratio are the significant factors that influence mortgage loans default in Malaysia. Research limitations/implications – Future studies may expand the sample by employing data from other types of financial institutions that would give greater insights as findings might vary due to differences in objectives, functions and regulations.In addition, the findings are subjected to the censoring bias where future studies could perform the survival analysis to control for censoring bias and re-validating the findings of the present study.Practical implications –The findings provide valuable insights for lending institutions and the government to formulate housing loan policy in Malaysia. Originality/value – To the best of the authors’ knowledge, this is the first study in the context of emerging economies that uses financial institution’s internal data to investigate factors of mortgage loan default

The Characteristics of Household Loans in Conventional and Islamic Banks in Malaysia

The high debts among Malaysia’s households and the dual banking system in Malaysia motivates this study to investigate the characteristics of the household loan in the conventional and Islamic banking institutions. The loan characteristics are vital as it serves as ‘red flags’ of loan default in the banking institutions. As conventional banks and Islamic banks are under different banking concepts and principles; normally accompanied by different loan policy and strategies, this study provides insights on the loan characteristics of the banking institutions. Using the estimated logit model, the results give information on the exposure to risk of default of the banking institutions. The results may be useful in the formulation of the lending policies of the banking institution

Savings and Investment Behaviour of the Consumer of Financial Services and Their Service Expectations from Banks (S/O 12349)

Deciphering the relationship between domestic savings, investment and growth has occupied one of the major areas of focus in economic theory and has consequently attracted the attention of empirical research. According to World Bank data, the ratio of gross savings as a percentage of GDP of Malaysia fell from 35.3 percent in the year 2000 to 30.37 percent in 2013. The ratio was 52.08 in Singapore, 32.97 in Thailand and 33.90 in Indonesia in the year 2014. The profile of household savings reflect that the average savings of Malaysian household as percentage of adjusted disposable income, and average household savings as percentage of GDP during 2000 to 2013, were 1.37 and 3.78 percent respectively. The actual percentages fell from 1.82 percent and 5.27 percent in the year 2010 to 1.40 percent and 3.84 percent respectively by the end of 2013. If the mandatory pension contributions are taken out, the profile of household savings in the country would be further worse. Given the above perspective, present research was aimed at i) deciphering the drivers of savings of Malaysian households, ii) to assess the future savings behavior in physical and financial forms of assets and iii) to assess the service expectations of customers from banks in the country which will enable banks to workout appropriate strategies to garner business. This study is based on a primary survey of the savings and investment behavior of 1107 bank customers in three peninsular cities of Malaysia in 2013. Using Seemingly Unrelated Regressions (SUR) Framework, the key driver of savings is income, which, is found to have a positive and significant influence on savings. The influence of income is higher on the saving in financial assets than physical assets. Location however, is significantly and positively influencing the amount of saving in physical assets. Other self-perceived factors like market price and infrastructure have a significant and negative impact on the saving in physical assets. In terms of future saving behaviour, 25 percent of households are not likely to make any change in their savings profile in various financial and physical assets in which the percentage distribution of the change in savings of households in four types of asset (deposits, other financial assets, real estate and other physical assets) seems to be normally distributed. The results also indicate that the respondents tend to decrease their percentage of saving in financial assets of non-deposit, other physical assets. They are likely to increase their percentage of savings in deposits and real estate. It is also interesting to note that respondents, who are single, are more likely to increase their percentage of saving in real estate and decrease their percentage of savings in the form of deposit. Another significant findings based on logit model to estimate the predicted probability of the relative quality of customer service shows CIMB customers are less satisfied with the location, employee responsiveness, and administrative effectiveness. On the other hand, the AMMB customers are more satisfied with speed; HLB customers are more satisfied with customer orientation. BIMB is found to be most vulnerable in terms of its potential switch of its customers. The implication of the results is that banks in Malaysia need to pay more attention to working out appropriate customer retention strategies to strengthen their position in the marketplace, one of which is to keep a close tab on their branch network which is not only the major cost centre but is also the pivot of business growth by ensuring customer deligh