Banking sector: What went up and came down in 2019

Borrowings continue to grow across key segments and household loans register the highest figure, while NPLs remain small

by ASILA JALIL/ pic by HUSSEIN SHAHARUDDIN

DESPITE the gloomy outlook and challenging environment, the country’s financial system inched higher last year.

Borrowings continued to grow across key segments, while non-performing loans (NPLs) remained small compared to the whole banking industry’s lending and total assets.

Here are the key figures which reflect the banking sector’s performance for the whole of last year.

Rise in Assets

The country’s banking system’s total assets rose by RM94.74 billion at the end of 2019. Total assets expanded 3.5% to RM2.83 trillion from RM2.74 trillion recorded at the end of 2018, according to official banking figures released by Bank Negara Malaysia.

The increase is significant compared to the whole banking assets which were only RM950.9 billion at the end of 2007.

The increase in assets was helped by the rise in loans and advances which jumped to RM1.73 trillion, Islamic banking, property, plant, equipment and others.

Increase in Borrowings

More people are borrowing. Last year saw an increase in loans applied in December by 5.5% year-on-year to RM63.87 billion from RM60.54 billion recorded in December 2018.

The banking system approved loans totalling RM33.7 billion in December 2019 compared to RM18.1 billion in the same month of 2018.

Loans applied for the purchase of residential property stood at RM19.58 billion, the highest figure recorded based on loans applied by purpose.

The amount was 15.1% higher from RM17.01 billion applied in the same month the year before.

Tracing back to 2007, the total loans applied for the same purpose only stood at RM6.42 billion.

Loans applied for the purchase of passenger cars increased 30.4% to RM6.48 billion from RM4.97 billion in the same period the previous year. The total loans in 2007 was RM4.29 billion.

Credit card loans were almost unchanged at 0.6% to RM3.6 billion from RM3.58 billion the previous year, while in 2007 the figure stood at RM2.92 billion.

By sector, a total of RM63.87 billion of loans were applied, a 5.5% increase from RM60.54 billion applied the previous year. In 2007, loans applied for sector totalled RM39.61 billion.

Household loans registered the highest figure which was RM36.84 billion. It increased 9.7% from RM33.58 billion in December 2018, while in 2007 it stood at RM16.02 billion.

But it was slower for the construction sector as total loans applied dropped 7.7% to RM3.57 billion from RM3.86 billion the previous year. In 2007, the loans applied totalled to RM2.22 billion.

Loans at the End of 2019

The total lending stood at RM1.77 trillion at the end of 2019, higher than RM1.7 trillion recorded at the end of 2018.

Housing loans remained a key borrowing for the banking sector as the sector loaned RM40 billion more, pushing the outstanding loans to RM572.4 billion at the end of last year compared to RM532 billion (end-2018). The increase was largely fuelled by the Home Ownership Campaign (HOC).

Personal loans outstanding of the total borrowing rose to RM69.5 billion (end-2010) from RM67.4 (end-2018), revolving credit RM109.2 billion (end-2019) from RM107.9 billion (end-2018) and overdraft RM56.3 billion (end-2019) from RM55.2 billion (end-2018) and passenger cars RM157.9 billion (end-2019) from RM156.5 billion (end-2018).

One of the sectors that recorded a drop is other loans which fell to RM81.3 billion (end-2019) from RM84.6 billion (end-2018). Other loans comprised of (Islamic banking scheme) SPI loans, floor stocking loans, non-SPI credit cards, staff loans and other loans.

Bad Loans Still Under Control

The banking system’s NPLs/impaired loans and impairment provisions for six months remained low at 1.59% against total borrowings. The figures for bad debt and provision for six months totalled RM429.1 billion at the end of 2019 compared to RM385.3 billion (end-2018).

For the banking system at the end of 2019, NPLs/impaired loans rose to RM26.8 billion from RM25.2 billion as of December 2018.

By purpose, purchase of residential property took the lion’s share totalling RM6.9 billion as at December 2019 compared to RM6.1 billion (end-2018), credit card RM357.5 million (end-2019) compared to RM356.2 million (end-2018), non-residential property RM3 billion (end-2019) from RM2.9 billion (end-2018) and working capital RM8.3 billion (end-2019) compared to RM7 billion (end-2018).

However, bad debts related to passenger car purchases dropped last year to RM1.9 billion (end-2019) compared to RM1.2 billion (end-2018).