Here’s why watchful OCBC is cautious in lending to this Southeast Asian state

It’s specifically careful in lending to government-linked companies.

The Oversea-Chinese Banking Corporation is treading on thin ice in its Malaysian business as it avoids future problems and adjusts its dealings in the country to exert more focus in its expansion in Eastern Malaysia.

According to UOB Kay Hian, the bank has been canny in lending to companies aligned under the state government and not with the federal government.

UOB Kay Hian says the banking group aims to focus on the Eastern part of the country instead, where some foreign banks have exited the market.

“OCBC will reposition some existing branches and add new branches. Management does not have an appetite for expansion in loans but wants to be prepared for future recovery,” UOB Kay Hian said.

Meanwhile, while OCBC has seen uncertainty in one of its Southeast Asian businesses, it has seen robust growth in another.

“Loan growth was robust in Indonesia at 11.3% qoq and 21% yoy, driven by Food & Beverage and Tobacco industries. OCBC NISP has expanded beyond its core SME business franchise to consumer and corporate banking. Many large corporations are already banking with OCBC NISP,” UOB Kay Hian said.