Local banking system asset quality remains healthy, says BNM

KUALA LUMPUR: The local banking system asset quality remained healthy in February 2019, as overall gross impaired loans edged slightly higher, contributed by several distressed corporate borrowers.

Nevertheless, the banks’ net impaired loans ratio was stable at 0.9%, said Bank Negara Malaysia (BNM) in its “Monthly Highlights – Feb 2019” report.

“Banks have continued to maintain sufficient buffers against potential credit losses with total provisions to total loans ratio sustained at 1.4%,” it said.

Meanwhile, headline inflation recorded a smaller negative of -0.4% during the month compared with -0.7% in January.

Transport inflation remained negative, but its negative contribution to inflation was smaller following the increase in global oil prices in February.

BNM said food inflation remained stable at 1.0%, while the higher inflation for food away from home was offset by the lower inflation for some fresh food items.

“Excluding the impact of the changes in the consumption tax policy, core inflation rose to 1.6% in February 2019 from 1.5% in January,” it said.

The latest overall Industrial Production Index recorded a slightly lower growth rate of 3.2% year-on-year in January 2019 compared with 3.4% in December 2018.

“The manufacturing sector growth moderated to 4.2% in January 2019 from 4.4% in the previous month, due to weaker production of electronics, in line with other countries that are part of the electrical and electronics global value chain.

“Notably, primary-related production recorded a strong recovery due to better output of palm oil-based products,” BNM said.

Month-on-month (m-o-m), net financing recorded a lower annual growth at 5.8% in February compared with 5.9% in January, while outstanding corporate bond growth increased to 7.9% m-o-m from 7.3% previously.

Growth in outstanding loans moderated to 5.0% during the month, while outstanding business loan growth moderated to 4.3% m-o-m compared with 4.8% previously, mainly in the mining and quarrying, real estate and primary agriculture sectors.

“Outstanding household loans stood at 5.2% compared with 5.5% in January amid marginal moderation across loan purposes,” it said.

It also said that domestic financial markets improved amid positive investor sentiments as the ringgit appreciated by 0.5% against the US dollar in February, supported by non-resident portfolio inflows to the bond market.

This was in line with the regional trend and was driven by improved global investor risk appetite, BNM said.

“The 10-year Malaysian Government Securities yield declined by 17.4 basis points, driven by non-resident inflows of RM5.7 billion into the government bond market during the month.

“Meanwhile, the FBM KLCI increased by 1.4%, supported by improved domestic sentiments in the construction sector and extension of trade talks between the US and China,” it added.