THE banking system continued to maintain healthy liquidity positions, recording a strong liquidity coverage ratio of 152.5% in September, a position which remained supportive of intermediation activities, said Bank Negara Malaysia (BNM).

The central bank said Malaysian banks sustained deposit growth, riding on recovery in economic activities, which continued to support lending activities with the aggregate loan-to-fund ratio remaining stable at 82.5% compared to 82.6% in August.

In its monthly highlights – September 2022 report today, BNM’s shared asset quality in the banking system also remained intact, with overall gross and net impaired loans ratios broadly stable at 1.82% (August: 1.84%) and 1.12% (August: 1.13%) respectively.

It noted loan loss coverage ratio, including regulatory reserves, also remained at a prudent level of 115.2% of impaired loans, with total provisions accounting for 1.8% of total loans, whereby as of end-September 2022, the banking system recorded RM41.9 billion of total provisions and regulatory reserves.

However, it said net financing growth moderated in September, growing by 5.6% as at end-September (August: 6.1%), reflecting lower growth in both outstanding loans of 6.4% and against 6.8% in August, and corporate bonds (3.5%; August: 4.3%).

BNM said growth in outstanding household loans remained unchanged at 6.6%, reflecting steady growth across most purposes.

“Despite some moderation, loan disbursements continued to record high growth amid sustained repayment trends.

“For businesses, growth in outstanding loans declined to 5.2% from 6.8% in August, partly due to a higher base effect. Nonetheless, loan disbursements remained sustained, driven particularly by the wholesale trade, consumer manufacturing, and civil engineering segments,” the central bank said.

Meanwhile, BNM highlighted that domestic financial conditions tightened further in September, driven mainly by external developments.

In September, it said global bond yields rose, equity markets declined and the US dollar strengthened further, and this reflected expectations of further monetary policy tightening, especially by the US Federal Reserve to address persistent inflationary pressures amid a more moderate global growth outlook

Notwithstanding this, average trading volume and foreign exchange (FX) volatility in the domestic financial markets remained healthy, it noted.

“The 10-year Malaysian Government Securities (MGS) yields continued to rise by 43.0 basis points (bps) compared to the regional average of 58.0 bps, which include countries like Singapore, Thailand, the Philippines, Indonesia and South Korea.

“The FTSE Bursa Malaysia KLCI (FBM KLCI) declined by 7.8% against the regional average of -6.9%, driven by non-resident portfolio outflows from the domestic bond and equity markets.

“The ringgit depreciated by 3.5% against the US dollar compared to the regional average of -3.8% amid continued strength of the US currency,” it said.

On another note, BNM shared that wholesale and retail trade growth remained strong in August with the index of wholesale and retail trade continuing to record double digit, though lower, growth of 27% in August 2022 (July: 33.4%).

“The strong growth was driven mainly by the motor vehicle segment. In addition to the low base in August 2021, when showrooms were closed during the implementation of the national recovery plan in the first half of the month, continued strength in purchases of motor vehicles also provided a lift to growth.

“This, together with stronger activity in the retail segment contributed to the acceleration in month-on-month seasonally adjusted growth of 3.1% against -1.6% in July,” it said.

Meanwhile, BNM noted that headline inflation declined to 4.5% in September from 4.7% in August as lower inflation in the prices of fresh chicken, fresh vegetables and fuel more than offset higher core inflation.

However, the central bank said core inflation increased to 4.0% during the month versus 3.8% in the previous month largely reflecting higher inflation in the prices for repair and maintenance of personal transport, food away from home, and bread and bakery products.

It added that core inflation increased more moderately by 0.3% on a month-on-month basis against 0.6% in August. – Bernama, October 31, 2022.