Bank Negara: Business loans outpace household

PETALING JAYA: Business loans grew stronger in March while the pace of household loan growth slowed down in the same month.

In a statement following the release of its monthly highlights and statistics, Bank Negara said the domestic banking sector’s outstanding business loans grew by 4.2% in March as compared to 3.6% in February.

The stronger business loan growth was mainly in the manufacturing and transport sectors due to higher disbursements.

“Repayments were sustained at lower levels since February,” stated the central bank.

Meanwhile, the growth of outstanding household loans was lower at 3.7% in March, compared with 4.4% in the previous month. This was amid higher repayments on loans for the purchase of securities.

“Disbursements on credit cards declined markedly (in March),” Bank Negara added.

Overall, the banking system’s loan growth was sustained at 4%, which was marginally higher than the 3.9% growth in February.

On the growth of outstanding corporate bonds, Bank Negara pointed out that lower issuances amid higher redemptions led to a slower growth of 7.6% in March.

In comparison, outstanding corporate bonds grew by 8.2% in February.

While concerns arise about the resilience of the banking system amid the current economic climate, the central bank said the banking system’s asset quality remains healthy.

“Banks’ asset quality remains sound with overall gross and net impaired loans ratio sustained at 1.6% and 1.0%, respectively.

“Banks continue to set aside ample provisions to buffer against potential losses based on forward looking assessments,” it added.

Commenting on the domestic financial markets, Bank Negara said it has been affected amid heightened global risk aversion.

In March 2020, domestic financial markets experienced non-resident portfolio outflows amounted to Rm17.7bil as risk-off sentiments intensified amid heightened uncertainties on the severity and potential economic impact of the Covid-19 pandemic.

Despite the large scale monetary and fiscal stimulus measures worldwide, global risk aversion remained elevated. This led to higher demand for safer and more liquid assets such as cash and US Treasury securities.

In addition, the substantial decline in global oil prices further hampered sentiments in the global financial markets.

“As a result, the ringgit depreciated against the US dollar by 1.8%, the FBM KLCI declined by 8.9% to close at 1,351 points, and the 10-year Malaysian Government Securities yield increased by 52.9 basis points.