KUALA LUMPUR – Bank Negara Malaysia’s (BNM) April 2022 monthly-highlights reports strong liquidity coverage ratio for the country’s banking system, sustained net financing growth, and higher bond yields.
The central bank’s statement said that the liquidity coverage ratio of 156.7%, a value that puts the banking system in a position supportive of intermediation activities.
As of March this year, the aggregate net stable funding ratio (NSFR) stood at 119.0% while asset quality remained intact with gross impaired and net impaired loan ratios maintaining stability at 1.6% and 0.9% each.
According to BNM, banks are staying prudent in loan provisioning as a buffer against potential credit losses. The total provisions and regulatory reserves are valued at RM40.2 billion as at April 2022, up from the RM39.8 billion marked in March this year.
The report adds that total provisions represented a 1.8% share of the total banking system loans and overall 113.4% of impaired loans.
Furthermore, BNM stated that net financing growth was sustained in April, continuing to grow at 4.6%. The growth was bolstered by higher growth in outstanding loans of 5% in April, as compared to the 4.6% in March, amid some moderation in the growth of outstanding corporate bonds at 3.7% compared to 4.6% in March as well.
Overall outstanding household loans maintained at 4.9%, demonstrating steady growth throughout the majority of purposes.
The central bank further notes that growth loan disbursements showed a slight increase in April, recording 10.8% compared to the 10.2% in March with a growth in loan repayments of 8.5%, higher than the recorded 3.2% in March.
Consequently, outstanding loan growth for businesses rose from 4.5% in March to 5.7% in April. This performance reflects higher growth in working capital loans which increased from 6.3% in March to 8.3% in April, as growth in working capital disbursement outpaces the repayments.
Global developments drives bond yields
BNM’s reports also stated that external developments resulted in the increase of bond yields for April.
Global financial conditions had tightened in April brought on by expectations of quicker US monetary policy normalisation and increased investor risk aversion caused by the Russian-Ukraine war.
The central bank adds that despite spillovers to Malaysia’s financial markets, adjustments were orderly and average trading volumes remained healthy.
According to the statement, the 10-year MGS yields increased by 53 basis points, alongside higher bond yields globally. As the country transitions into endemicity, the FBM KLCI saw a marginal increase of 0.8% due to improved prospects for the domestic economy.
Apart from that, the ringgit’s depreciation is in line with other major and regional currencies. This is in response to foreign portfolio outflows during the month when investors review and reallocate their funds into safe-haven assets like in the US, BNM added.
In regards to April’s export, the central bank stated that Malaysia recorded a growth of 20.7% compared to the 25.3% recorded in March this year. The performance demonstrates continued strength across Malaysia’s export products.
Additionally, the report stated that export performance will continue to gain from high external demands and the upcycling of global technology. At the same time, high commodity prices and enhanced production will also provide exports with further impetus.
Despite that, trade outlook remains dependent on the disruptions to the global supply chain along with conditions in Ukraine.
For headline inflation, BNM reports a marginal increase to headline inflation from 2.2% in March to 2.3% in April this year. Core inflation is also marginally higher at 2.1% compared to the 2.0% in March.
The central bank explains that inflation had increased mainly because of higher inflation for food away from home, air travel prices, and personal transportation repair and maintenance costs.
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