Outstanding household loans 6% higher as at end-July

TOTAL household loans outstanding in Malaysia rose 6% to RM936.7bil as at end-July 2018, which represented 57.4% of the total loans outstanding in the country’s banking system.

According to the Economic Outlook 2019, for the first seven months to July 31, 2018, loan disbursements to households led the advance in overall loan growth in the banking system, jumping 13.2% to RM191.7bil.

Over the period, total loan disbursements by banks rose 7.3% to RM678.8bil with increased lending to both businesses and households while total loans outstanding grew 5.3% to RM1,631bil.

However, the household debt level was also reported to be moderating since 2015 following government measures to rein it in, while total household financial assets remained strong at RM2,458.4bil.

Overall household debt moderated to RM1,165.7bil or 83.8% of gross domestic product as at end-June 2018.

“The debt servicing capacity of households remained intact, supported by stable income and employment growth.

“Given the stable employment and income, the household debt level is expected to remain manageable in 2018 and 2019,” it said.

The main source of the household debt remains residential property purchases followed by personal use and passenger car purchases.

For the business sector, lending rose 5.2% to RM487bil, which accounted for about 72% of the total disbursements. Total loans outstanding to the business sector rose 3.7% to RM588.5bil.

“Most of the the loans were channelled to the manufacturing (27.4%) as well as wholesale and retail trade, restaurants and hotels (26.1%) sectors,” said the report.

Loan applications by businesses rebounded 7.4% to RM221.8bil while approvals increased 3.3% to RM100.5bil.

Along with the loan growth, the report said Malaysia’s banking system maintains a strong capital position to absorb losses with a total capital buffer of RM149.5bil, well above minimum regulatory requirements.

“As at end-July 2018, common equity tier 1 capital, tier 1 capital and total capital ratios stood at 13.3%, 14.2% and 17.7% respectively, well above the Basel III minimum regulatory levels,” it said.

The report said Malaysia’s financial system remains “stable and broadly intact” despite external pressures.

In terms of its performance over the first seven months in 2018, the banking system recorded a higher pre-tax proit of RM22.3bil due to interest- and finance-related activities, while returns on assets and equity remained steady at 1.5% and 13.1% respectively.