Net financing growth slows in November on weak corporate bonds

Banks continue to maintain sufficient buffers against potential credit losses with total provisions

By SHAHEERA AZNAM SHAH / Pic By MUHD AMIN NAHARUL

NET financing growth of the local banking sector moderated to 4.7% in November 2019 from 4.9% in October 2019, dragged by the decline in outstanding corporate bonds.

According to Bank Negara Malaysia’s (BNM) monthly highlights for November, outstanding loan growth was flat month-on-month at 3.7%, while outstanding corporate bond growth fell to 7.4% from 8.1% in October.

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

For the month of November, total loans disbursed by the banking system was stable at levels higher than the historical monthly average at RM99.9 billion against RM99.7 billion in October.

“Disbursements remained forthcoming to businesses, including to the real estate and primary agriculture sectors.

“Following a significant increase in October, there was a slight moderation in household loan disbursements for residential properties,” BNM said on Tuesday.

The overall net impaired loans ratio remained “stable” at 1%. Banks continued to maintain sufficient buffers against potential credit losses with total provisions, including regulatory reserves at 125.3% of total impaired loans.

Meanwhile, domestic financial markets put up a mixed performance in line with global financial market sentiments due to the ongoing development in international trade negotiations.

“During the earlier part of the month, investors’ risk-appetite improved due to optimism on a potential US-China trade deal.

 

“However, towards the end of the month, sentiments on trade tensions turned cautious following the passing of US legislation in support of pro-democracy movements in Hong Kong,” BNM said.

The ringgit appreciated by 0.1% against the US dollar in November, driven by non-resident portfolio inflows to the domestic bond market.

These inflows led the 10-year Malaysian Government Securities yield to decline by 1.2 basis points.

The FTSE Bursa Malaysia KLCI continued its downward plunge, shedding 2.3% during the month as the benchmark gauge tracked regional equity markets.

A cautious outlook on global trade developments weighed on the local bourse, while regional equity markets including Malaysia were affected by foreign investors’ portfolio rebalancing following changes to the composition of the benchmark MSCI Emerging Markets Index.

Headline inflation for November was lower at 0.9% from 1.1% in October, signalling the lapse in the price increases of fast food and cigarettes in November 2018.

Core inflation, which excludes factors such as the impact of consumption and tax policy changes, was stable at 1.4%.

In October, the index of wholesale and retail trade slipped to 5.2% from 6% in September due to moderation across all segments.

The motor vehicles segment expanded by 3.3% in October compared to 4.5% a month before, supported by high car sales amid new launches and year-end promotions.