Outstanding loans and corporate bonds see slower growth in June

According to BNM, net financing expanded by 5.9% in June after registering at a 6.3% growth in May


NET financing across the domestic banking system moderated in June this year compared to May as outstanding loans and corporate bonds saw slower growth, Bank Negara Malaysia (BNM) said.

In its monthly highlights for June 2019 released yesterday, the central bank noted net financing expanded by 5.9% in June after registering 6.3% growth in May.

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

Of the total 5.9% growth, banking system loans contributed a 3.1% expansion for June compared to 3.3% in the previous month, while corporate bonds increased 2.8% in June against a 2.9% growth in May.

Outstanding corporate bond growth also slipped to 4.9% in June versus 5.1% in May, while outstanding business loan growth was lower at 3.4% against 3.6% in May.

“Total loans disbursed by the banking system remained near the historical monthly average of RM93 billion. The steady disbursements were across both the household and business segments, including small and medium enterprises (SMEs),” BNM said.

The actual total loan disbursement for June amounted to RM94.8 billion, of which RM60.9 billion went to the business sector, RM37.5 billion was received by non-SMEs and RM23.4 billion went to SMEs. Households received the remaining RM25.8 billion of loan disbursements.

Banking institutions are “well-positioned to withstand severe macroeconomic and financial shocks” with excess capital buffers of RM103 billion as at June 2019.

Excess total capital refers to total capital above the regulatory minimum, which includes the capital conservation buffer requirement and bank-specific higher minimum requirements.

Domestic financial markets experienced a resumption of non-resident portfolio inflows during June, pushing the FTSE Bursa Malaysia KLCI up by 1.3% compared to a 0.5% rise in May.

“This was mainly driven by improved investors’ risk appetite towards the region amid rising market expectations for an interest rate reduction in the US and easing trade tensions,” BNM said.

Subsequently, the ringgit appreciated by 1.3% against the US dollar, in line with regional currencies, following a 1.5% depreciation in May.

The 10-year Malaysian Government Securities yield fell by 15.5 basis points versus a 0.4 basis point increase in May.

The central bank also warned of slower exports going forward, in line with weaker global economic expansion and ongoing US-China trade tensions, despite export growth being stronger at 2.5% in May after a 1.1% expansion in April.

This was due mainly to stronger exports of non-electrical and electronic and agriculture products.

“Going forward, export growth is expected to remain moderate on account of modest global growth and trade activity,” BNM cautioned.

Headline inflation rose to 1.5% in June after climbing 0.2% in May, reflecting the lapse in the impact of the Goods and Services Tax (GST) zerorisation that was implemented in June last year.

“While the lapse in the impact of the GST zerorisation contributed to higher overall food inflation, inflation of fresh food items remained contained amid the festive season price controls,” BNM stated.

Excluding the impact of the changes in the consumption tax policy, core inflation — which excludes price-volatile and price-administered items, as well as the estimated direct impact of tax policy changes — came in at 1.5% versus 1.6% in May, BNM revealed.