Household loan statistics which point to a slower pace of household debt accumulation is positive for the Malaysian economy, as it also shows an improvement in the quality of household lending, says Moody's Investors Service.
In its just-released report on banks in Malaysia titled, "Continued Slowing of Household Loan Growth Is Credit Positive for Malaysian Banks", it said the further fall of household loans last year from 2015, is credit positive for the asset quality of the country's banks. The banking statistics were released by Bank Negara Malaysia on Jan 31.
"In 2016, the growth in household loans was driven by safer housing loans, specifically, those supported by property collateral, and which exhibited low delinquency ratios, while growth in riskier unsecured loans remained weak," said a Moody's Vice President and Senior Analyst, Simon Chen.
"We expect that the household debt to Gross Domestic Product (GDP) for 2016 will moderate from the 89 per cent recorded at end-2015.
"Among the Malaysian banks rated by Moody's, Public Bank Bhd (A3 stable, a3) and Hong Leong Bank Bhd (A3 stable, baa1), were those with the largest exposure to the household sector, and would benefit the most from further improvements in the leverage profile of households," he added.
At end-2016, total outstanding household loans which makes up 57 per cent of total banking system loans, grew five per cent.
Meanwhile, Moody's said a decline in auto loan growth also reflected in the households' increasing cautiousness towards discretionary spending.
The overall household impaired loan ratio remained stable at 1.1 per cent at end-2016, unchanged from the level at end-2015.
Similar to household loans, the asset quality of the banks' corporate loan portfolios remained stable at 2.3 per cent at end-2016.