Banks’ asset quality remains sound, says BNM

KUALA LUMPUR: The asset quality of banks in Malaysia remained sound in February with the overall net impaired loans ratio remaining stable at 1%, Bank Negara Malaysia (BNM) said in its Monthly Highlights-February 2020 report released today.

The central bank said local banks also continued to maintain sufficient buffers against potential credit losses with total provisions, including regulatory reserves, at 125.1% of total impaired loans.

It said that net financing growth was higher at 5% in February from 4.7% in January, due to the faster expansion in outstanding loans of 3.9%.

“Outstanding corporate bond growth also increased slightly to 8.2% (January: 8%). Outstanding business loan growth increased to 3.6% from 2.5% in January due mainly to lower repayments, which reflects a normalisation from its high levels in recent months.

“Disbursements were broadly sustained during the month. However, outstanding household loan growth declined to 3.7% from 4.5% in January on account of lower disbursements for credit cards, and securities and car loans,” it added.

In February, the report said, domestic financial markets experienced non-resident outflows amid higher global risk aversion following the worsening of the Covid-19 epidemic.

As a result, it said, the ringgit depreciated by 3.3%, in line with all regional currencies of  -3.4% to -0.3%, while the FBM KLCI declined by 3.2% to close at 1,483 points as at end- February, in line with regional equity markets.

“Despite non-resident outflows, yields in the domestic bond market declined. In particular, the 10-year Malaysian Government Securities (MGS) yield declined by 30.5 basis points. While domestic institutional investors provided some support, the large decline mainly reflected expectations for monetary easing amid concerns over the growth outlook,” it added.

Headline inflation moderated to 1.3% in February from 1.6% in the previous month, mainly reflecting the decline in transport inflation following lower prices of retail fuel products and the reduction in toll rates on selected highways by 18%.

“Core inflation decreased to 1.3% (January: 1.7%), partly reflecting the lower rental inflation,” the report said.

Meanwhile, it said exports contracted by 1.5% in January 2020 due to slower growth in manufactured exports and a sharper decline in commodities exports.

Going forward, export growth is expected to remain weak, reflecting the adverse impact of Covid-19 on global demand and supply chains, it added. – March 31, 2020, Bernama

Subscribe and get top news delivered to your Inbox everyday for FREE