KUALA LUMPUR: The further decline in household loan growth in 2016 is credit positive for the asset quality of Malaysian banks, as it points to slower debt accumulation among households, Moody’s Investors Service said.
In a statement, the rating agency said among Malaysian banks under its rating radar, Public Bank Bhd (A3 stable, a3) and Hong Leong Bank Bhd (A3 stable, baa1) – banks with the largest exposure to the household sector – will benefit the most from further improvements in the leverage profile of households.
At end-2016, total outstanding household loans – making up 57 per cent of total banking system loans – grew 5 per cent from a year ago, slower than the 8 per cent growth recorded in 2015 and 10 per cent in 2014.
“In addition, the data shows an improvement in the quality of new household lending. In 2016, the growth in household loans was driven by safer housing loans – specifically, loans supported by property collateral – and which exhibited low delinquency ratios, while the growth in riskier unsecured loans remained weak.
“Meanwhile, the decline in auto loan growth also reflects households’ increasing cautiousness towards discretionary spending,” Moody’s said.
The overall household impaired loan ratio remains stable at 1.1 per cent at end-2016, unchanged from the level at end-2015.