Malaysia’s credit growth to ease slightly: Fitch Solutions

The headquarter of Central Bank of Malaysia. (Photo: themalaysianreserve.com)

Kuala Lumpur (VNA) - Fitch Solutions Country Risk and Industry Research (Fitch Solutions) has forecast that credit growth in Malaysia will ease slightly to 4.3% this year from 4.5% in 2022 due to a weaker economic outlook and higher borrowing costs.

Malaysian banks will likely remain on a stable footing despite potential negative spillovers from banking stresses in the US and Europe, as a result of robust liquidity and capital buffers, as well as a much less restrictive monetary environment, Fitch Solutions said in the latest research report.

Asset quality has also remained fairly stable despite the phasing out of support measures, and a significant deterioration would not be expected in the months ahead, it added.

The rate-hiking cycle in the Southeast Asian country has also been much more gradual and modest than in other parts of the world as inflation has been more subdued, and interest rates were expected to peak soon.

Fitch Solutions noted that Malaysian banks were also well-capitalised with the aggregate banking system capital ratio coming in at 18.5% in February, compared with an average of 18.3% in 2022.

This is significantly higher than the regulatory minimum of 10.5% (8% total capital ratio and a 2.5% capital conservation buffer), resulting in an excess capital buffer of 135 billion RM (30.5 billion USD).

According to the report, common equity tier 1 (CET1) and tier 1 capital ratios also stood at 14.8% and 15.3%  respectively, in the month, versus the Basel III requirement of 4.5% and 6.0%.

Fitch Solutions said the banking system’s strong liquidity coverage and loan-to-deposit ratios will continue to underpin financial stability in the country.

The latest data showed that the liquidity coverage ratio rose to 152.7% in November 2022, from 147.1% in January 2022, which was much higher than the minimum requirement of 100%, implying a higher margin of safety, it said./.