Banking system’s asset quality remains healthy – BNM


THE banking system’s asset quality remains healthy post-blanket loan moratorium, said Bank Negara Malaysia (BNM).

It said overall gross impaired loans ratio edged higher to 1.43 per cent in October (September: 1.38 per cent), albeit from historically low levels, driven by the household segment.

“Total provisions grew by 5.54 per cent for the month of October compared to 7.44 per cent in September as banks continue to set aside additional provisions against future credit losses,” it said in its Monthly Highlights – October 2020 report.

It noted that banks continued to restructure and reschedule loans of viable borrowers who might still face challenges servicing their loans.

On net financing growth, BNM said it was sustained at 4.5 per cent in October compared with 4.4 per cent in September with higher contribution from corporate bonds.

Outstanding loans continued to expand (4.3 per cent in October versus 4.4 per cent in September), supported by household loans, it said.

“Outstanding business loan growth moderated slightly to 2.5 per cent from 2.7 per cent in September.  However, total disbursements increased during the month, driven mainly by working capital loans,” it said.

BNM noted that headline inflation moderated slightly to -1.5 per cent on-year in October from -1.4 per cent in September due to lower inflation for communication services and domestic retail fuel.

It said the lower inflation in communication services was also reflected in core inflation, which eased to 0.8 per cent from 1.0 per cent in September.

Meanwhile, export growth moderated to 0.2 per cent in October from 13.6 per cent in the preceding month due mainly to weaker electrical and electronics (E&E) exports.

“Non-E&E manufactured exports also recorded lower growth, weighed by chemical and chemical products and optical and scientific equipment,” BNM said.

Looking ahead, the central bank said exports were expected to be supported by the recovery in global growth.

“Nonetheless, the trade outlook remains contingent on global developments surrounding the COVID-19 pandemic,” it said.

BNM said the domestic financial markets’ performance was mixed as investor sentiments were mainly affected by concerns over rising COVID-19 cases globally and the implementation of another round of movement restrictions in some countries, including Malaysia.

“Consequently, global equity indices experienced broad-based declines as investors remained cautious over the outlook for a global economic recovery,” it said.

BNM said the FBM KLCI fell by 2.5 per cent amid broad-based declines in global equity indices.

Non-resident portfolio inflows, however, continued to support the domestic bond market during the month as expectations for prolonged accommodative monetary policy in the advanced economies supported yield-seeking activities in the region, it said.

“As a result, the 10-year Malaysian Government Securities yield declined marginally by 3.8 basis points while the ringgit remained mostly unchanged during the month,” the central bank said.