Stage 2 loans in Malaysia had improved during the first quarter of 2023 (1Q 2023), declining to 5.0 per cent as more borrowers successfully transitioned out of repayment assistance programmes, said Bank Negara Malaysia (BNM) governor Tan Sri Nor Shamsiah Mohd Yunus.
The central bank governor said that in the household segment, the quality of household borrowings remained sound, supported by improving labour market conditions and the availability of assistance.
She said this mainly involved loans for purchasing houses and cars, in line with improving income.
“This has also been supported by prudent loan affordability assessment by banks, which helped ensure borrowers have buffers against rising costs.
“Impairment remains low and within expectations among borrowers from all income groups,” she said during the 1Q 2023 Economic Performance announcement at Sasana Kijang here today.
Nor Shamsiah said the majority of borrowers exiting repayment assistance programmes continued to maintain good repayment behaviour with limited signs of difficulties.
In line with this, she noted that leading credit risk indicators such as the Stage 2 loans continue to improve, further suggesting that additional impairments will likely remain manageable.
Stage 2 loans are the share of loans that have exhibited deterioration in credit risk, for which banks are required to set aside provisions based on lifetime expected losses under Malaysian Financial Reporting Standards (MFRS) 9.
The Stage 2 loans ratio was introduced with the implementation of the MFRS9 standards beginning Jan 1, 2018.
Meanwhile, Nor Shamsiah said the higher growth in business loan applications through the 1Q was driven by investment loans, particularly for constructing and purchasing non-residential properties.
She said the small and medium enterprises (SMEs) repayment capacity on aggregate also remain intact, and they continue to up pace disbursement.
“I want to reiterate that the economy is no longer in crisis and has, in fact, continued to gain strength.
“Most economic indicators bear this prognosis. The International Monetary Fund (IMF), World Bank, Asian Development Bank (ADB), and international and local analysts also arrived at the same conclusion,” she added.
Malaysia’s economy recorded a better-than-expected expansion of 5.6 per cent in 1Q 2023.
