BNM: Outstanding loans lower in February

Net financing recorded annual growth of 5.8% in February, down from 5.9% in January


NET financing growth across Malaysia’s banking system moderated in February this year compared to January as business loans were impacted by slower loans in selected sectors, while gross impaired loans (GILs) rose on certain non-performing corporate borrowings.

In its monthly highlights released last Friday, Bank Negara Malaysia (BNM) said net financing recorded annual growth of 5.8% in February, down from 5.9% in the previous month.

Net financing refers to outstanding loans of the banking system, excluding development financial institutions and outstanding corporate bonds.

“Outstanding corporate bond growth rose to 7.9% in February (7.3% in January), while the growth in outstanding loans moderated to 5% during the month (5.5% in January),” the central bank said.

Growth in outstanding business loans also came in lower at 4.3% during the second month of the year compared to 4.8% in January, mainly attributed to the mining and quarrying, real estate and primary agriculture sectors.

Outstanding household loans, however, eased to 5.2% against 5.5% in January, amid “marginal moderation across loan purposes”.

“Overall GILs edged slightly higher, contributed by several distressed corporate borrowers.

“Nevertheless, banks’ net impaired loans ratio stood stable at 0.9%,” BNM said, stating that the banking system’s asset quality remains healthy.

Banks also continued to maintain sufficient buffers against potential credit losses, with total provisions to total loans ratio sustained at 1.4%.

Meanwhile, the ringgit appreciated by 0.5% against the US dollar in February, supported by non-resident portfolio inflows to the bond market in line with the regional trend and driven by improved global investor risk appetite.

The 10-year Malaysian Government Securities (MGS) yield declined by 17.4 basis points, driven by non-resident inflows of RM5.7 billion into the government bond market during the second month of 2019.

The FTSE Bursa Malaysia KLCI rose 1.4% in February, supported by improved domestic sentiments in the construction sector and extended trade talks between the US and China.

Headline inflation came in at -0.4% during the month compared to -0.7% in January. Transport inflation remained negative, although its negative contribution to inflation was smaller with the increase in global oil prices throughout February.

Food inflation was unchanged at 1% in February. The higher inflation for food away from home was offset by the lower inflation for some fresh food items.

Core inflation rose to 1.6% in February from 1.5% in January, excluding the impact of the changes in the consumption tax policy.

On the supply side, the latest overall Industrial Production Index saw lower growth at 3.2% year-on-year in January 2019, versus a 3.4% expansion in December 2018.

Growth in the manufacturing sector moderated to 4.2% in January this year from 4.4% in December due to weaker production of electronics, which BNM said was in line with other countries that are part of the electrical and electronics global value chain.

“Notably, primary-related production recorded a strong recovery due to better output of palm oil-based products,” it added.