- Recent statistics for the banking sector suggest that Malaysia’s financial system remained well-capitalised as at end- July 2014.

- Loan loss cover stood at 104.2% as at end-July 2014, compared with 98.0% a year earlier. Gross impaired loans ratio was unchanged at 1.8% vs. 2.0% as at end-July 2013.

- Meanwhile, non-performing loans (NPLs) fell for a second consecutive month in July at -0.7% MoM (June: -0.6% MoM).

- The decrease in impaired loans was attributable to both the household and business segments which declined by 0.6% and 0.8% MoM, respectively.

- In the business segment, impairments were lower for the following sub-segments: (i) purchase of fixed assets other than land and building (-17.0% MoM); and (ii) working capital (-2.0% MoM).

- NPLs were also lower for several consumer segments, including the purchase of securities (-1.7% MoM), residential mortgages (-2.9% MoM), personal use (-1.0% MoM), and credit card (-0.3% MoM).

- Elsewhere, M3 inched up slightly by 0.1ppt to +5.7% YoY in July, driven by the private sector (+9.5% YoY) and higher net claims on the government (+22.1% YoY).

- That said, the pace of growth in new household loans has moderated in response to measures implemented by BNM that reinforces responsible financing practices in the environment of rising household debt.

- Overall loans growth had moderated to +8.6% YoY in July 2014 as the increase in interest rate spurred higher repayments during the month (June: +9.3% YoY).

- Outstanding loans growth for the household segment slowed to +10.6% YoY during the month (June: +11.2% YoY). Meanwhile, the business segment had registered a slower loans growth of +4.6% in July (June: +5.6% YoY).

- As at end-July, loans to households represented the bulk of financing assets in the banking system, contributing 68.25% to total outstanding loans.

Source: AmeSecurities