Malayan Banking Bhd (Maybank), the country’s largest banking group by assets, is looking at a loans growth of 8 per cent to 9 per cent, while CIMB Group Holdings Bhd is forecasting a loans growth of 10 per cent after having grown 12.8 per cent last year.

Maybank chalked up a loans growth of 12 per cent last year.

CIMB group chief executive Tengku Datuk Seri Zafrul Aziz said while the bank would continue to see challenges, it would nevertheless continue to grow and improve its performance, albeit at a slower pace.

“We are facing challenging times,” he said at a press conference held to announce the bank’s full-year results for the financial year ended December 2015.

Maybank’s president and chief executive Datuk Abdul Farid Alias said the group would see slower overall growth from the corporate segment because several sectors were recording lower profits and having fewer investment activities.

Abdul Farid said the group’s Singapore loans growth is expected to be between 3 per cent and 4 per cent from the 6 per cent growth in FY15 due to slower regional and domestic economic growth, and that asset quality may continue to rise if the credit cycle turns and the weakness in the oil and gas sector persists.

Maybank is, however, targeting a higher loans growth from its Malaysian operations at between 6 per cent and 7 per cent for this year from 5.3 per cent last year, driven by the consumer sector and public infrastructure projects such as the MRT and the LRT.

Maybank’s Malaysian operations made up about 56 per cent of the bank’s loan portfolio last year.

Abdul Farid said Maybank is targeting a deposits growth of between 10 per cent and 11 per cent this year, lower than the 12.8 per cent deposit growth reported in FY15.

“Asset quality remains a concern because of the volatility that we see in the market, whether from the foreign exchange or from the interest rate hike by the US Federal Reserve.

“We want to make sure that our balance sheet remains strong and we preserve asset quality,” Abdul Farid said.

Maybank’s net impaired loans (NIL) ratio climbed to 1.38 per cent as at Dec 31, 2015, the highest in at least two years.

Maybank chief financial officer Datuk Mohamed Rafique Merican said the increased impaired loans came from several overseas corporate clients in Indonesia and China and one Malaysian account.

“Asset quality from the consumer and SME segments are still good and improving, but the corporate side is more challenging,” Abdul Farid said.

When asked if the bank sees its NIM ratio moving higher, Abdul Farid said: “You are right to think that the current economic volatility would increase the stress on customers. But what we see is that the stress would be on certain individuals only.”

Meanwhile, CIMB Group also predicts further compression of net interest margins (NIM) in the current year amidst a soft economic environment.

Tengku Zafrul said the group is expecting NIM – which is the difference between interest income made by banks and the interest paid out to its lenders – to compress by some five to 10 basis points this year.

Last year, CIMB’s NIM stood at 2.66 per cent against 2.80 per cent in FY14.

Loan loss provisions remained elevated from its Indonesian operations, one of its largest overseas businesses last year.

However, Tengku Zafrul expects it to be “lower” this year, backed by improvements in the country’s overall economy.

He did not provide any indications of when such provisions would stop being made.

Last August, international credit agency Fitch Ratings said a combination of sustained weak coal prices and oversupply would continue to challenge the credit profiles of the mining sector, and consequently, have a major impact on the mining sector-related asset quality at Indonesia’s banks.

Although the direct exposure for every other large bank there is around 3 per cent or less, the banks also have indirect exposure to the mining sector through construction loans for mining projects, it pointed out.

While it was earlier anticipated that provisions for these would more or less be cleared by last year-end, some market observers had predicted that effects could well eat into this year and beyond.