The World Bank has reported that household loans in Malaysia expanded faster in the first quarter of the year, due to strong purchases of residential properties and passenger cars – although growth in credit card loans showed a decline.

“Outstanding household loan growth increased to 6% in Q1 2021 (Q4 2021: 5.4%), mainly driven by loans for the purchase of residential properties and passenger cars,” said the World Bank in the June edition of its Malaysia Economic Monitor. This was driven in part by the tax exemption measures announced by the government in its economic stimulus packages.

However, growth in credit card loans declined, suggesting a drop in overall spending activity during the pandemic, the international institution said.

The report highlighted that Malaysia’s domestic financial sector was well equipped to weather the second movement control order that lasted close to a month, with the banks maintaining adequate capital and liquidity positions during the first quarter.

“Liquid assets held by the banking system remained adequate to support financial activity, with a coverage ratio of 145% in Q1 2021 (Q4 2020: 14%), well above the minimum statutory requirement of 100%,” the World Bank said. “Furthermore, banks continued to maintain an adequate capital buffer, with the tier 1 capital ratio standing at 14.9% at the end of March 2021.”

The banking sector’s overall return on equity stood at 8.5% against 9.2 % in Q4 2020, with return on assets estimated to stand at 1% – just a 0.1 percentage point lower than the previous October-December period. Overall loan impairment ratio in March was stable at 1.6% in the same month despite higher impairments from households amid continued pressure on household income.

(Source: Malay Mail)