Net financing grew by 5% in June, says BNM

by S BIRRUNTHA / Pic by MUHD AMIN NAHARUL

MALAYSIA’S net financing grew by 5% in June from 4.5% in May, driven by higher growth in outstanding loans while outstanding corporate bond growth remained unchanged at 3.4%.

“Outstanding household loan growth increased across all loan purposes reflecting higher growth in loan disbursements, especially for cars and houses,” Bank Negara Malaysia (BNM) said in a statement on Friday.

“For businesses, outstanding loans grew at 5.8% in June from 5.4% in May, as growth in loan disbursements grew 23% in June, outpaced that of repayments (June: 20%; May: 23.6%).

By sector, the higher outstanding loan growth reflected stronger growth in wholesale and retail trade, transport, storage and communication.

Commenting further, the central bank said the banking system continued to record healthy liquidity positions, with the aggregate Liquidity Coverage Ratio at 148.4%.

It said banks’ funding sources remained stable and supportive of credit intermediation in the economy amid sustained growth in deposits.

BNM also noted that the loan-to-fund ratio remained stable at 81.8%.

On that note, BNM said asset quality in the banking system remained intact, as the overall gross impaired loans ratio increased slightly to 1.7% in June from 1.6% in May.

However, it said net impaired loan ratios remained broadly unchanged at 1%.

“Banks continued to be prudent in loan provisioning to buffer against potential credit losses, with total provisions and regulatory reserves amounting to RM 41.1 billion in June.

“Total provisions stood at 1.8% as a share of total banking system loans and 108.5% of impaired loans,” it noted.

In June, global financial market conditions tightened following the 75 basis points (bps) hike (largest since 1994) in the US federal funds rate, amid elevated US inflationary pressures.  

BNM said this had subsequently raised concerns on the US and global economic growth outlook.

It added that adjustments in the domestic financial markets remained orderly amid positive economic recovery prospects.

Amid foreign portfolio outflows from the domestic bond market, 10-year MGS yields rose by 9bps, a smaller increase compared to regional bond yields (average: 21.5bps).

The ringgit depreciated by 0.7% (regional average: -3.1%) in June amid broad US dollar strength, while the FTSE Bursa Malaysia KLCI declined by 8% (regional average: -7.1%).

Meanwhile, BNM highlighted that exports registered a robust growth of 38.8% in June to RM146.2 billion from 30.4% in May, which is the highest level of exports on record.

It said this reflects continued strength across Malaysia’s export products, driven by strong global demand for manufactured exports and high commodity prices.

Moving forward, it noted that export growth is expected to remain supported by continued external demand for semiconductors, albeit at a moderating pace due to slower global growth.